Are taxes at a 60-year low?

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This USA Today article, which talks about the average personal tax rate being at a 60-year low, is getting a lot of attention. The conclusion is pretty fascinating:

Americans paid their lowest level of taxes last year since Harry Truman’s presidency, a USA TODAY analysis of federal data found. Federal, state and local taxes — including income, property, sales and other taxes — consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

But are those numbers right?

Many commentators have been quick to jump on the findings. Kevin Drum, over at Mother Jones, points out that the USA Today analysis leaves out payroll taxes, like Social Security. Add those in and taxes go up to about 17% of personal income.

Still, the broader point of the story—that the average person is paying less in taxes—isn’t necessarily wrong. An economist at the Tax Foundation, a non-partisan research outfit, writes:

Despite these problems of data definition, the headline’s claim about 2009 being a year of historically low taxes isn’t far off… Total taxes divided by a broad income measure, NNP (which is somewhat close to personal income), had a rate of about 26.6 percent in 2009, which was the lowest since 1959.

What does all that mean? Well, maybe not as much as we’d like. After all, we’re in a recession—a time period in which you’d expect taxes to drop (incomes drop too, but since the tax code is progressive, not proportionately). Plus, the government has been rolling out all sorts of (temporary) tax breaks in an attempt to juice consumer spending.

But perhaps more importantly, none of these figures look at how personal taxes are spread out over the population. Are people paying less in tax on average because fewer people are paying taxes at all? Or is the average tax burden going down because of a proliferation of tax dodging at the upper end of the income spectrum?

There is lot to explore here, and the USA Today data point is interesting to note, but by itself it’s hardly enough to make an argument about taking policy in one direction or another.

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