Economic Myths: We Separate Fact From Fiction

With the recent Iowa straw poll [1] and President Obama's bus tour [2], Americans are hearing a cacophony of arguments about the wobbly economy. The federal stimulus package passed in 2009 was either a deficit-busting failure full of wasteful projects or an unparalleled rescue that would have been more successful if it had only been bigger. Taxes are either stifling or the lowest they've ever been. America needs to invest in infrastructure, or "infrastructure" is merely a euphemism for more government spending. So, here's our guide to the most prevalent economic myths.

1. Taxes have been going up and are high compared to levels in other countries.

The first part is wrong; the second is also wrong but contains a grain of truth.

The percentage of income that Americans spend on taxes is the lowest it's been since 1958, according an analysis by USA Today [3]. And with the exception of five years after the 1986 Tax Reform Act, the highest marginal income [4] and corporate tax rates [5] are the lowest they've been since World War II.
Federal taxes as a share of GDP are at their lowest point since 1950 [6], according to the nonpartisan Congressional Budget Office [7]. When all taxes, including state and local, are added up, the proportion of GDP going to taxes has been essentially flat for nearly half a century, according to the Organization for Economic Cooperation and Development.

The OECD figures also show that, as a share of GDP, taxes in the United States are lower than in most other developed nations:

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