Mark Twain once quipped, “There are three kinds of lies: lies, damned lies, and statistics.”  No mystery then that my favorite college math course turned out to be – you guessed it – Statistics. What else would a humanities loving history geek choose when forced to select a course from the math department. Numbers that lie? Wow! A math class geared toward human fallibilities. I love college!

Turns out that one of the larger collectors of numbers is our own federal government (uh-oh, this can’t be good). No, no, no…data collected by bureaucrats is a good thing, especially when similar data collected for similar purposes become measured out over decades, sometimes centuries. Historians are suckers for spotting trends and highlighting anomalies. Within these tremendously detailed and mind-numbing (if not sleep-inducing) charts, produced by civil servants for civil society, are stories. Big stories. Like the one I’m about to share with you now.

Topic? Taxes.

For trends and anomalies on taxes, historians turn to the Office of Management and Budget (OMB). Thankfully, the OMB provides dozens upon dozens of charts to fit just about any one’s insatiable demand for raw data (and for free at the click of a mouse). The chart entitled “Percentage Composition of Receipts by Source” reveals a whopper of a story. It’s a revelation of blow-by-blow and year-by-year of who and which tax revenues were tapped the most or least. This story is in two parts, both of which utilize a compare and contrast method to arrive at our whopper of a tale.

Click for a larger image. Data courtesy of Table 2.2 of the OMB.

Part One – comparing and contrasting 1937 and 1947. Though only ten years apart, the two charts reveal a tremendous shift as to where the federal government sourced its revenue. In 1937, 20.3% of our government’s income derived from the income tax – not the lion’s share. The greatest source of revenue for the government came in the form of excise taxes, or taxes that are placed on specific items such as tobacco or gasoline. This accounted for nearly 35% of the federal revenue stream in 1937. Corporations paid 19.3%, or roughly just about the same as the contributions made by the people’s income. Of note is that nearly 15% of the federal income came from the category dubbed “other.” In case you are wondering, I did research this: the two largest categories comprising the “other” are “customs duties and fees” and the “estate and gift tax.” Rounding out the list is “Social Insurance” at 10.8% of the revenue stream.

Click for a larger image. Federal revenue in 1947 (source: OMB)

The chart from 1947, though, reveals that the government’s favored revenue source changed – and by a lot. The people paid dearly supplying the government with almost half of its till – or 46.6%: that’s roughly a 130% increase in just ten years.  The previous number one supplier – excise taxes – reduced its burden from 34.8% to 18.7%. Corporate taxes as a percentage of government revenue also rose, though modestly, and social insurance income decreased slightly. The huge decrease from the “other” category signaled a shift in thinking about international trade. High tariffs in 1937: a post war free trade mantra in 1947.

The question thus arises, was this an anomaly or a trend? World War II, of course, occurred in between 1937 and 1947, and the bill for the all out war machine it produced was coming due. But the OMB tables show that the lowest percentage of government revenue derived from the people’s income since the close of the Second World War was in 1949 and 1950 (the Truman years) where the people’s share equaled 39.5% and 39.9% respectively: much higher than the 20.3% share paid by income tax in 1937. In fact, income tax as a percentage of government revenue since the closing World War II up until 2011 averaged 44.79% compared to the pre-WWII average of 16.3%. So the compare and contrast exercise between the two pie charts shows that 1947 was the beginning of a new trend: income tax becoming the permanent lion’s share of government revenue.

But this is not the “Big Story.”

The George W. Bush years. Click for a larger image (data derived from the OMB, Table 2.2)

For that we need only to look at the last two presidential administrations: Bush II and Obama.

Under the Bush presidency income taxes as a percentage of government revenue actually dropped whereas Corporate contributions to the federal revenue stream rose.

The Obama administration’s past three years shows something altogether different. Obama drastically cut Corporate contributions while shifting the burden back toward income tax. The comparison of these two charts dispute the assertion that the current President is a socialist. If these two charts prove anything, it was Bush who was the socialist with Obama as the corporate liberator.

President Obama's first three years. Click for larger image (Source OMB, Table 2.2)

Yet, it is Obama who faces scathing rhetoric from the radicalized right and the Tea Party fringe for overtaxing and burdening the very corporate entities that allegedly create jobs. The numbers show otherwise.  In fact, Obama’s numbers on taking Corporate Income as a share of federal revenue are so low that they beat out Ronald Reagan’s by nearly a full percentage point: 7.8% average verses 8.71%.

And this is where the story truly erupts.

From Bush II to Obama, the share of the federal government’s revenue derived from the people’s income actually dropped, Obama’s average at 44.13% versus Bush’s eight year average of 45.1%. Yet, by all appearances, Obama faces a tax revolt while Truman – who, as mentioned earlier, watched over the revenue shift whereby the people’s share increased by 130% – did not. What gives?

The answer is that in 1947, by and large, most Americans trusted the federal government. We had just won the Second World War, our government defeated Nazis and other fascists, the feds had secured the world for peace and prosperity, we were sending our returning GI’s to college on Uncle Sam’s dime, and most folks reflected back on FDR’s handling of –first the Great Depression, and the war – positively.

But beginning with the Reagan years, a steady and unrelenting stream of negativity poured from conservatives and their think tanks indicting our government as – at worst, evil – at best, a burden laden upon the American populace.

There was no tax revolt in 1947 because Americans felt their government was an honest broker. There is darn near a tax revolt today because, culturally, many Americans distrust their Uncle Sam. The rhetoric of the right is gaining culturally, and this is the big story, and this is what President Obama inherited: proof – that despite the drop in taxes over the past three years – there’s a sucker born every minute.

Advertisements