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Posted by: Michael Mandel on December 17
This chart has something for both Democrats and Republicans. It’s federal personal income taxes as a share of personal income (four quarter moving average).
If I was a Republican economist, I would point out that federal income tax revenues at the end of the 1990s rose to very high levels, in excess of 12% of personal income. That’s historically a signal for tax cuts.
If I was a Republican economist, I would also point out that tax revenues have bounced back since the Bush tax cuts. Federal personal income taxes were 9.9.% of personal income in the four quarters ending with 2007III. The average since 1960? 10%.
If I was a Democratic economist, I would point out that the Bush tax cuts drove federal income tax revenues to very low levels historically, just over 8% of personal income.
If I was a Democratic economist, I would also point out that if the economy is going into a slowdown, then we would expect tax revenues to fall, so this 10% may be the peak of the cycle.
Final note: If we average the past ten years, we get 10.1%. I think I see a pattern here.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.