The Truth-O-Meter Says:

witness23 · Sep 22, 2010

"Our tax rates are lower now than they were under Ronald Reagan. They're much lower than they were under Dwight Eisenhower."
Barack Obama on Monday, September 20th, 2010 in a televised town hall

Barack Obama says taxes are lower today than under Reagan, Eisenhower

During a Sept. 20, 2010, town hall televised on CNBC, President Barack Obama made a pointed comparison involving taxation under his presidency.

"Our tax rates are lower now than they were under Ronald Reagan," Obama said. "They're much lower than they were under Dwight Eisenhower."

We thought that claim was worth a run through the Truth-O-Meter.

The most obvious way to make the comparison is to use income tax rates paid by people in various tax brackets. Due to the complexity of comparing a dozen or more income ranges that each need to be adjusted for inflation, economists most frequently compare just the top rate.

First, we'll look at the tax rates, using a convenient historical guide published by the Tax Foundation, an independent tax research group. The tables go as far back as the dawn of the income tax in 1913.

Today, the top income tax rate is 35 percent, starting at $186,825 for individuals and $373,650 for couples

By contrast, during the eight years of the Eisenhower presidency, the top rate averaged roughly 90 percent, typically hitting individuals making $200,000 a year or couples making $400,000 a year. In 2010 dollars, that's equivalent to $1.6 million for an individual and $3.2 million for a couple. Someone making the 1954 equivalent of $186,825 in today's money would have paid a tax rate of 59 percent back then.

So by this measure, Obama's comparison with Eisenhower earns a True.

Now for Ronald Reagan.

In 1981, Reagan's first year, the top tax rate was 70 percent, hitting individuals earning $107,100 and couples earning $215,400. The top rate dropped immediately to 50 percent in 1982 and stayed there through 1986. In 1987, the top rate fell again to 38.5 percent, and in 1988, it fell to 28 percent, kicking in at $113,300 for married individuals and $149,250 for married couples. (The 1988 incomes would be equivalent to $209,000 and $275,000 today.)

So, for one year of the Reagan presidency, the top rate was lower than it is now under Obama. For the other seven years, it was higher.

For the Reagan comparison, we rate Obama's statement Mostly True.

But we'll add a few caveats. The first is that looking at the top income tax rate offers an incomplete look at overall tax policy because it only looks at income taxes, not at other levies such as payroll, sales and property taxes. This is not a trivial difference: According to the Tax Foundation, more than two-thirds of all taxes paid by Americans in 2010 will be something other than income taxes.

There is another way -- calculating all taxes paid by Americans and dividing the sum by the nation's total income. To make this calculation, we turned to the Tax Foundation's annual "Tax Freedom Day" report, which offers calculations of total tax burden going back to 1900. (There was no federal income tax then, but there were state and other taxes.)

The foundation's expected tax burden for 2010 is 26.9 percent, up slightly from the 2009 tax burden of 26.6 percent. (This is not unusual: The tax burden typically falls during recessions, as taxpayers move to lower tax brackets.)

Under Eisenhower, that figure ranged from 24.8 percent to 27.7 percent, with the figure lower than 26.9 percent for seven out of eight years. So by this measurement, the tax burden was lower most of the time under Eisenhower.

Under Reagan, it ranged from 29.2 percent to 31.1 percent, meaning that in all eight years it was higher than the current tax burden under Obama.

Still, Obama did speak of "tax rates," not "taxes" or "tax burdens," so we'll stick to the tax bracket comparison in making our ruling.

The second caveat we'll mention is that conservatives say it's inappropriate for Obama to claim credit for lower taxes. They note that today's tax rates were established by his Republican predecessor, George W. Bush. In fact, they say, it is Obama's stated intention to increase taxes on individuals earning $200,000 and couples earning $250,000, which would push the top tax bracket to 39.6 percent.

They also note (as we have, in giving him a Promise Broken on the Obameter) that the president has already signed into law several tax increases. He hiked the levy on cigarettes; imposed tax penalties on people without insurance; taxed tanning services, pharmaceuticals, medical devices, and raised Medicare tax rates for upper-income individuals. (Not all of these taxes kick in immediately.)

We think it's fair to note that Obama has raised taxes and promises to do so again. But we don't think that undermines the factual accuracy of his statement from the town hall. If you make the comparison using tax brackets -- which we think was Obama's clear intent -- then the president is right when comparing today's rates to Eisenhower's, and he's close to right when he makes the comparison to Reagan. On balance, we rate Obama's statement Mostly True.

greg334 · Sep 22, 2010

There is no doubt in my mind he is right but under Bush, the irs took steps to slow down audits, be more tax payer friendly when there are issues and to become more of a friend to get taxes paid, this has had a 100% reversal under Obama.

witness23 · Sep 22, 2010

greg334 said:
There is no doubt in my mind he is right but under Bush, the irs took steps to slow down audits, be more tax payer friendly when there are issues and to become more of a friend to get taxes paid, this has had a 100% reversal under Obama.

I am not doubting you, but do you have examples or websites that show the things you speak of? I have never been through an audit (knock on wood) but if I had to go through one I think I would come out okay. That said, when you say:

more tax payer friendly when there are issues and to become more of a friend to get taxes paid

. Greg, you know the amount of people that cheat on there taxes are astronomical and if you have those out there not paying there share then that's a slap in the face of the honest men and woman who do pay their taxes. Now, I'm not sure if that's what you are talking about in your comment or if the President's administration isn't "tax friendly", which is an oxymoron, or if Bush's administration was "tax friendly" I would need more clarification of your statements.

AMonger · Sep 23, 2010

witness23 said:
In 1981, Reagan's first year, the top tax rate was 70 percent, hitting individuals earning $107,100 and couples earning $215,400. The top rate dropped immediately to 50 percent in 1982 and stayed there through 1986. In 1987, the top rate fell again to 38.5 percent, and in 1988, it fell to 28 percent, kicking in at $113,300 for married individuals and $149,250 for married couples. (The 1988 incomes would be equivalent to $209,000 and $275,000 today.)

So, for one year of the Reagan presidency, the top rate was lower than it is now under Obama. For the other seven years, it was higher.

This creates a false impression. Reagan inherited an obscene tax rate. He spent years chopping away at it, largely over the objection of Congressional Demon-crats. Obama inherited a relatively low tax rate and wants to raise it. It's disingenuous to imply that he was a bigger tax-er than the current president.

witness23 · Sep 23, 2010

AMonger said:
This creates a false impression. Reagan inherited an obscene tax rate. He spent years chopping away at it, largely over the objection of Congressional Demon-crats.

False impression? The article spells it out in black and white showing the start of Reagans term until his 8th year? The article isn't trying to "create" anything, other than showing the facts.

Now for Ronald Reagan.

In 1981, Reagan's first year, the top tax rate was 70 percent, hitting individuals earning $107,100 and couples earning $215,400. The top rate dropped immediately to 50 percent in 1982 and stayed there through 1986. In 1987, the top rate fell again to 38.5 percent, and in 1988, it fell to 28 percent, kicking in at $113,300 for married individuals and $149,250 for married couples. (The 1988 incomes would be equivalent to $209,000 and $275,000 today.) So, for one year of the Reagan presidency, the top rate was lower than it is now under Obama. For the other seven years, it was higher.

For the Reagan comparison, we rate Obama's statement Mostly True.

Okay, I have to remember where I am, the Soapbox, and you possibly may not believe the St. Petersburg Times Politifact facts, which I understand. So here is the Federal Individual Income Tax Rates History - Income Years 1913-2010

http://www.taxfoundation.org/files/fed_individual_rate_history-june2010.pdf

AMonger said:
Obama inherited a relatively low tax rate and wants to raise it.

The Bush tax cuts expire and will go back to the 2001 tax rates, do you know why? Because they were never paid for and because the bill was passed under reconciliation, revenues further than 10 years in the future could not be changed. And so, on December 31, 2010, they will expire and revert to 2001 law, except for the top people making over 200,000(single) and 250,000(married) about 2 or 3% of Americans.

AMonger said:
It's disingenuous to imply that he was a bigger tax-er than the current president.

How is the article being disingenous? Never once in the article were they critical of Reagan, or say that he was a "bigger tax-er" all they did is compare the tax rates from Reagan to what the President wants to do and what the President stated in a speech???? I don't get it?

I highly recommend clicking here for their FAQ page: The Tax Foundation - Frequently Asked Questions on the Expiring Bush-Era Tax Cuts

layoutshooter · Sep 24, 2010

"The Bush tax cuts expire and will go back to the 2001 tax rates, do you know why? Because they were never paid for and because the bill was passed under reconciliation, revenues further than 10 years in the future could not be changed. And so, on December 31, 2010, they will expire and revert to 2001 law, except for the top people making over 200,000(single) and 250,000(married) about 2 or 3% of Americans."

I get a kick out of that term "paid for". What a laugh. The government cannot "lose" tax revenues. They are NOT entilitled to OUR hard earned money to begin with. The problem is that they are just spending FAR too much money, most of which is NOT govenment responsibilities under the Constitution. SPEND less, LOWER tax rates, give the PEOPLE control of their lives and labor back. The PEOPLE were NOT meant to work for the government. That is slavery. The more they take of your wages the more of YOUR life that they steal.

witness23 · Sep 24, 2010

layoutshooter said:
I get a kick out of that term "paid for". What a laugh. The government cannot "lose" tax revenues. They are NOT entilitled to OUR hard earned money to begin with. The problem is that they are just spending FAR too much money, most of which is NOT govenment responsibilities under the Constitution. SPEND less, LOWER tax rates, give the PEOPLE control of their lives and labor back. The PEOPLE were NOT meant to work for the government. That is slavery. The more they take of your wages the more of YOUR life that they steal.

Layout, with all due respect, the conversation isn't about if the Government has the right to tax us or the Governments irresponsible spending habits. The conversation is about what the President said about the Bush Tax Cuts and the tax brackets.

I do not think you will find anyone in here that would disagree with you on the Governments spending habits, so you are in essence, preaching to the choir.

layoutshooter · Sep 24, 2010

witness23 said:
Layout, with all due respect, the conversation isn't about if the Government has the right to tax us or the Governments irresponsible spending habits. The conversation is about what the President said about the Bush Tax Cuts and the tax brackets.

I do not think you will find anyone in here that would disagree with you on the Governments spending habits, so you are in essence, preaching to the choir.

Your are right. Just hammering home the messege, just as Washington is hammering home their swill. I just don't have the benefit of the "free press" to push my messege so I do it where ever and when ever I can.

As to tax rates and taxes in general. The term "income tax" SHOULD be changed to "productivity tax". That reflects what it does better. When you have "progressive" rates you tax those who produce more than those who do NOT produce or produce less. Higher rates do NOT tax the "RICH". You can bet your booties that the Kennedys and Bushs and the like won't get hurt by higher rates. ONLY those who work hard and succeed will.

End the "productivity tax" COMPLETELY!! Go to a "consumption" tax of some sort. Then we would be collecting taxes on the hookers, drug dealers and all the other low lifes that are NOT paying ANY taxes on their illegal gains.

Pilgrim · Sep 24, 2010

layoutshooter said:
"The Bush tax cuts expire and will go back to the 2001 tax rates, do you know why? Because they were never paid for and because the bill was passed under reconciliation, revenues further than 10 years in the future could not be changed. And so, on December 31, 2010, they will expire and revert to 2001 law, except for the top people making over 200,000(single) and 250,000(married) about 2 or 3% of Americans."

I get a kick out of that term "paid for". What a laugh. The government cannot "lose" tax revenues. They are NOT entilitled to OUR hard earned money to begin with. The problem is that they are just spending FAR too much money, most of which is NOT govenment responsibilities under the Constitution. SPEND less, LOWER tax rates, give the PEOPLE control of their lives and labor back. The PEOPLE were NOT meant to work for the government. That is slavery. The more they take of your wages the more of YOUR life that they steal.

Excellent point! That term "Paid For" is nothing but political spin that was created to hide the attitude of congress that revenue from taxation is THEIR MONEY to spend(waste) as they see fit; however, IT'S NOT THEIR MONEY - IT'S OURS. The politicians we elect to represent us should need to realize they're spending other people's money and that Govt needs to do without for a change and cut spending to come in line with revenues.

Regarding OBorat's comments about current tax rates: the current rates aren't the true issue; that problem facing us will be the astronomical current and future deficits that the boy president and his liberal cronies have run up in an unprecedented fashion. This guy is more ignorant of basic economic principles than any leader in recent memory. He just doesn't seem to understand that spending money the country doesn't have is a disastrous policy; although he brags about the low tax rates we now have, he is laying the foundation for exhorbitantly high tax rates in the future. He obviously has no idea how this monstrous debt will be reconciled, and he doesn't care. That will be somebody else's problem.

greg334 · Sep 24, 2010

Pilgrim,

Why do you insult Borat?

I mean the guy has it together and should be the communications director at the WH, gibbs is like that guy in that movie who had the pet goat.

chefdennis · Sep 25, 2010

gibbs is a pet goat....

AMonger · Sep 25, 2010

witness23 said:
False impression? The article spells it out in black and white showing the start of Reagans term until his 8th year? The article isn't trying to "create" anything, other than showing the facts.

The implication is crystal clear, unless you choose not to see it.

The Bush tax cuts expire and will go back to the 2001 tax rates, do you know why? Because they were never paid for and because the bill was passed under reconciliation, revenues further than 10 years in the future could not be changed.

Tax cuts "paid for" is a perversion of reason. Not only does it say that ours is only what the gummint chooses to let us keep, but those that say it apparently believe that it's normal or acceptable for DC to first decide what they're going to spend and then tax as necessary to get that revenue, as opposed to deciding on an acceptable tax rate only spending the revenue that that rate brings in.

How is the article being disingenous? Never once in the article were they critical of Reagan, or say that he was a "bigger tax-er" all they did is compare the tax rates from Reagan to what the President wants to do and what the President stated in a speech???? I don't get it?

Again, that's the implication, plain as day.

LDB · Sep 25, 2010

One bringing them down as soon as possible and one raising them as soon as possible. Yeah, real clear but not as presented by the liar in chief unless one has a pair of those special glasses for viewing.

greg334 · Sep 25, 2010

Witness, the info comes from the IRS themselves, not a website not conjecture but actual fact. They have changed strategies again because from the administration to the treasury department to the IRS, the strategy to close loop holes, bring up audit revenue reclamation numbers and the changes in how people advance all have happened as fast as the last administration.

Outside of that, there are a few things to point out.

Even though Reagan lowered the tax rates and changed the brackets around, the fact that a number of loopholes that benefited the population as a whole were also eliminated, making in essence an increase in taxes for many of us. The upper bracket people enjoyed the breaks but the middle class unbeknown to them them saw a slight increase in overall taxes but the bottom line on the 1040 was lower, thinking they got a big break.

Reagan didn't inherit any obsene tax rates, those rates were a lot better than the 1943 to 1964 rates that the population saw for those 21 years. It is utterly amazing that no one also sees that regardless how the original Bush tax scheme was passed, or what reconciliation took place to get the dems on board with it, the fact still remains 6 years with a republican congress, they only passed extension of the scheme and didn't even have the nerve to fight to make them law.

By the way, these were cuts for the first year and then they were normal rates. Saying Bush Tax Cuts seems to be a childish way of putting another spin on "hate the rich" class warfare crap.

Pilgrim · Sep 26, 2010

Without wading too far into the tall grass, I'd like to offer some stats for everyone to digest if they're so inclined. When considering historical tax rates we also have to consider historical incomes in order to put the information in the right perspective. For instance, the top tax bracket in 1964 was 91% for heads of housholds making over $300K and married couples filing jointly with income over $400K. But we have to also be aware that the median household income in 1964 was $6600 (considering today's standards, can you imagine the average family of four living on approx $500/month take-home pay?) Most families in that median range were taxed at the 22% bracket. If they made twice the median income ($13,200 which was probably considered rich, or at least upper class) they were taxed at 30%. Keep in mind that only 6.3% of families made over $15K in 1964 so there was only a tiny percentage of the population taxed at the upper brackets.

Compare that with the median household income in 2008: $52,028 which was taxed at a 15% rate that was established before the Bush 1 and Clinton presidencies.

For everyone's reading pleasure, here are a couple of links that provide a lot of historical data such as the above:

Population - Consumer Income Reports (P60)

The Tax Foundation - U.S. Federal Individual Income Tax Rates History, 1913-2010

Back in the 60s the nation's budget deficits were a considerably lower percentage of GDP than they are now. When one considers the historical data and compares it with the projected deficits Obama and his liberal Democrat congress has created, we can't help but be pessimistic about the future of the economy and the rates of taxation to be imposed on our children and grandchildren. I still predict that due to his overall incompetence in matters foreign and domestic, Barack Hussein Obama will establish himself as the worst president in the history of the USA.

greg334 · Sep 26, 2010

Up to $30k was considered middle class in the 60's.

Remember that the middle class was not labor or auto workers but them and everything up to and including doctors, lawyers and so on.

AMonger · Sep 29, 2010

greg334 said:
Reagan didn't inherit any obsene tax rates, those rates were a lot better than the 1943 to 1964 rates that the population saw for those 21 years. [/QUOTE

In 1981, Reagan's first year, the top tax rate was 70 percent,

Click to expand...

This is definitively obscene.

greg334 · Sep 29, 2010

Not really, what was obscene is the 91% tax bracket in 1954. Even with that high rate, there were deductions that were allowed that were closed under Reagan in I think '86, like Credit Card interest deductions.

The 1965 to '81 70% still allowed a lot of deductions, which lowered the effective rate a lot. The real issue wasn't the 70% but rather the lower end rate of 14% during that time. Also remember that in '82 and beyond we were seeing more and more tax refunds and credits to people who actually never paid taxes and make a living out of it.

AMonger · Sep 29, 2010

greg334 said:
Not really, what was obscene is the 91% tax bracket in 1954. Even with that high rate, there were deductions that were allowed that were closed under Reagan in I think '86, like Credit Card interest deductions.

The 1965 to '81 70% still allowed a lot of deductions, which lowered the effective rate a lot. The real issue wasn't the 70% but rather the lower end rate of 14% during that time. Also remember that in '82 and beyond we were seeing more and more tax refunds and credits to people who actually never paid taxes and make a living out of it.

14% may not be obscene, but it's definitely slightly offensive. So if that's the LOW rate, the rates above it are unquestionably obscene.