Average 2009 federal tax rate lowest in decades

According to a report released yesterday by the Congressional Budget Office, in calendar year 2009 federal taxes amounted to 17.4 percent of total household income, the lowest rate in the entire 30-year time frame covered in the report.

The next lowest rates were 18.0 percent in 2008 and 19.4 percent in 2003. The average for the 30-year period was 21.0 percent, and in 1979, the first year considered, the rate stood at 22.2 percent.

Incidentally, some news coverage, such as this article in The Washington Post, reported that the 2009 rate was the lowest “since 1979” or “in 30 years.” In fact, the CBO report doesn’t indicate when the rate was last this low.

In fact, computed as a percentage of GDP rather than total household income, 2009’s federal tax collections were lower than in any year since 1950, according to this table from the non-partisan Tax Policy Center operated by the Brookings Institution and the Urban Institute.

The main reason for the reduced rate in 2009 was the Great Recession, which cut incomes and pushed households into lower tax brackets. While income started recovering a little in 2009, the additional taxes were more than offset by the tax cuts that made up about a third of the stimulus program passed early that year. Consequently federal taxes were not just a percentage of a smaller total national income, they were a smaller percentage of a smaller national income, which is of course a major reason for the current budget deficit.

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