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Financial Planning / Tax Strategies


Subject:  Re: OT ~ Charley Reese's final column ~Long Date:  6/30/2011  4:47 PM
Author:  fleg9bo Number:  113620 of 127613

1990s it was 18-20% (ending at a high of 20.8% of GDP in 2000
- 2000s it continued to drop from the 20.8% high to 16.2% in 2010

One thing I find interesting is the co-existance of very high tax rates as a percentage of GDP in the late 1990s at the same time as excellent economic growth and declining budgets deficits to eventual surplus.

My own anecdotal evidence, based on myself, is that the higher taxes as a percentage of GDP in the late 90s was due to the stock market bubble, particularly the tech bubble, with lots of people cashing in stock options that pushed them into the higher brackets. In our case, the amount of federal income tax we paid in 2000 was almost 13 times more than what we paid in 1997. Then, because the company stock tanked at the end of 2000, our federal income tax for 2001 was a mere 5% of what it had been the year before.

So the highs in the late 1990s and 200 were harbingers of a bubble about to pop, not sustainable growth. "Surpluses as far as the eye can see" is how some characterized this period. There was also talk about "the surplus being squandered," but with the market beginning its nosedive in 2000 (NASDAQ and S&P500 peaks were in March of that year), there was no way those surpluses were going to last no matter who ran the show.

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