July 15, 2010

History of Federal Tax Receipts as % of GDP

Previously I talked about the History of Taxes as % of GDP.  In that article I showed two graphs showing the personal income tax as % of GDP and the corporate tax as % of GDP.   I decided to revisit that topic and show more graphs.  I like graphs.

The Government Printing Office (GPO) has data online for the budget of the US government showing historical details in tables.  In the 2011 FY budget tables in table 2.3 they list receipts by source as % of GDP from 1934 to 2015.    I made the graphs below using that data as is.   I decided to show just the period from 1946 to 2009.  Before 1946 the situation was a lot different given the depression and then WWII.   The numbers for 2010 to 2015 are just projections so I'm not showing those.

Since the numbers are represented as a % of the GDP then they will go up and down based on the changes in the GDP.   If tax rates remain the same but the economy is really strong one year then GDP will go up and the % of taxes as GDP will be lower as a result.    Its important to keep in mind that these figures are a reflection of the taxes relative to GDP but not a direct picture of tax policy.

Of course these figures are only for federal taxes and do not cover state or local taxes. 

First of all lets look at the historical trend of total receipts from 1946 to 2009:

The total tax receipts as % of GDP has bounced up and down a bit over the decades but the long term trend line for that period is pretty flat.   The average and mean rate was 17.8%, the low was 14.4% in 1950 and the high was 20.6% in 2000.

Personal Income taxes:

Personal income taxes are the taxes that get the most visibility when talking about federal taxes.   The trend in the amount of personal income tax as % of GDP has been surprisingly flat from 1946 to 2009.    As you can see the % amount bounces up and down from year to year but the overall trendline is only slightly tilted upward.   The average was 8.0% and the median 7.9%.  The low was 5.7% in 1949 and the high was 10.2% in 2000.

Excise Taxes :

Excise taxes used to be more significant but from 1946 to today they steadily dropped from around 3.1% to 0.4% in 2009.

Corporate income taxes

Corporate taxes as % of GDP have been on a gradually went down from 1946 to about 1980.    In 1952 the corporate taxes were about 6.1% of GDP but by 1983 they'd dropped to 1.1%.    From the 80's to 2009 the rate fluctuated a bit within the range of 1.0% to 2.7%. Some of the fluctuation in the tax rate is due to the performance of businesses rather than changes in tax policy.   So for example if the economy is bad then companies don't make as much money and therefore pay less taxes as a result.

Social security & retirement payments:

You can see there was a pretty steep upward trend from 1946 to around 1985.   It started at a just 1.4% of GDP and then ramped up to 6% by 1981.  But from the 80's onward it has held relatively flat between 6-7% range.

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