Composition of the Tax Bite

Greg Mankiw should be congratulated as he provides a graph of personal current taxes that includes what we pay at the state and local level relative to GDP. It does not include deferred taxes but no one knows how these will be paid as George W. Bush just scoffs at this reality. It also does not include payroll taxes but that’s OK as long as we are not denying the Trust Fund reserves.

But I do have a complaint. It leaves the impression that we are paying a lot more now they we have ever paid except during the Clinton years. To be fair – Greg did not say that even if one AB reader seemed to suggest commentary that Greg never made. But we should notice that Greg left off what I’d call business taxes. Since Greg was kind enough to cite his source – line 3 from table 3.1 found here – I’m defining business taxes to be the sums of lines 3 and 4. I’ve also graphed line 2 from the same table as total current tax receipts. Total taxes as a share of GDP are not higher than they’ve ever been. You see – we may be paying more in personal taxes but business taxes as a share of GDP have declined from their levels before 1981.