One of the claims being made by the Obama administration as they seek to justify the fact that they are going to ask for higher taxes is that America now has the lowest tax rates in sixty years.  That is not quite true.

On Friday Investors.com posted a story explaining exactly what has happened to America’s tax rates and revenues since 2008. 

The article points out:

“It’s true that tax revenues as a share of gross domestic product have fallen in the past three years.

“They were 17.5% in 2008 and 14.9% in 2009 and 2010.

“But this is simply a result of the prolonged recession and terrible recovery that killed incomes and corporate profits, blowing a hole in federal revenues. The amount of money raised through the individual income tax fell 21% from 2007 to 2009, while corporate tax payments plunged 63%.

“That’s neither a sign that we’re undertaxed nor an indictment of the Bush tax cuts. In fact, tax revenues under Bush hit 18.5% of GDP by 2007. That’s higher than the post-World War II average of 17.8%.”

It is interesting to me that when President Bush cut taxes, tax revenues increased as a percentage of the Gross Domestic Product.   The article points out that corporations and the wealthiest 5% of Americans pay 41 percent of all federal revenues.  Since these people were the hardest hit by the recession, tax revenues have gone down.  The article also reminds us that almost half of all Americans pay no income tax at all.

The reduction is federal revenues has to do with the fact that the tax burden is laid so heavily on corporations and wealthy taxpayers.  If the burder were more spread out, two things would happen–the revenue would not change so drastically when there was an economic downturn, and the American public might begin to notice and complain about the amount of federal spending.  When half of all Americans ‘have no skin in the game,’ there is no incentive to cut spending.  Since spending is the major part of our deficit problem, the distribution of tax liability might be a good thing to look at to find a solution.