Thursday, August 4, 2011

Reasonably conservative Obama

David Frum somewhat defends Obama's record. This section struck me as particularly surprising:

Obama’s only tax increases – those contained in the Affordable Care Act – do not go into effect until 2014. Personal income tax rates and corporate tax rates are no higher today than they have been for the past decade. The payroll tax has actually been cut by 2 points. Total federal tax collections have dropped by 4 points of GDP since 2007, from 18+% to 14+%, the lowest rate since the Truman administration

Assuming this is true, it seems fairly odd. Did the stimulus cut taxes by 4% of GDP? Well, no, the US GDP in 2010 was $14.66 trillion, and the total stimulus tax cut was $288 million. This is about 1.9% of GDP, but that outlay was over the entire length of the stimulus to date so we can safely assume it was lower. It can't be the cut in the payroll tax, because that happened too late for it to impact 2010. Perhaps it was a running decline from 2007 to 2010?

Well, I found tax numbers here and GDP numbers here (which reports GDP lower than the CIA number above). This shows GDP falling from 17.7% in 08 to 14.8% in 2010. Of the 2.9% reduction, about 0.8% is a fall in corporate tax collection. This leaves us with a real puzzle, because we know, or think we know, that the recession has had a disproportionate impact on those at lower economics rungs, and the WSJ editorial page loves to tell us that the rich pay all the income taxes.

I don't have a solution to this puzzle yet.

1 comment:

Mr Lonely said...

walking here with a smile.. have a nice day ~ =D

Regards, (A Growing Teenager Diary) ..