So tomorrow, April 17, is Tax Day. For those still wondering about why it’s on April 17 this year, it’s because April 15 was on a Sunday and today happens to be a state holiday (or a district holiday, if you prefer) in the District Columbia as well as in Massachusetts, which is home to the IRS processing center where many of us in the Northeast send our tax returns.
I had been planning to write here about how you should enjoy the moment, because taxes are only going to get higher after this. The main reason is that Americans are getting old and decrepit, which means Medicare’s drain on the federal budget will continue to rise and Social Security will cross the line in a few years from subsidizing the rest of the government (because payroll taxes currently bring in more than is spent on benefits) to costing money. But Money magazine’s Pat Regnier already did an excellent job of pointing this out back in February, and I don’t see any value in merely repeating what he said.
So what I’ve done instead is charted the trajectory of federal government receipts as a share of GDP over the past seven decades (I got the data from the White House Office of Management and Budget, and Time.com infographics czar Feilding Cage made it look good). I chose overall receipts to keep it simple, but rest assured that most of this money comes from personal income and payroll taxes:
It’s striking how little the tax burden has changed since the huge leap that took place during World War II. The skyrocketing taxes of the 1970s, the Reagan revolution, the budget bounty of the late 1990s, the collapse in tax receipts of the early 2000s–they’re all visible in the data, but they’re just fluctuations around a pretty consistent mean. The tax burden simply moved up or down a little within the postwar range of 16% to 21% of GDP. There seems to be a certain level of taxes we Americans have grown comfortable with, not much more and not much less.
Without any change in current commitments to Social Security and Medicare (and without a dramatic slowdown in the rise of health care costs), government spending will be more like 50% of GDP in a few decades, and taxes would inevitably have to follow. Which raises an interesting question: Will it be more important to American voters to keep our tax burden more or less where it is, or to keep all our promises to retirees? Retirees tend to vote religiously, and their ranks are growing, so I think I know what the answer is. But I’m not entirely sure about it.
Update: I made another chart, in response to one of the comments.