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Taxes
Yesterday, Today and Tomorrow
Alison Fraser
The Heritage Foundation
Showdown on Tax Policy
San Diego, CA
April 2009
Current Tax Receipts Below Historical Average
Total Federal Receipts as a Percentage of GDP, 1945-2009 estimate
24%
22%
Percentage of GDP
20%
Historical Average = 18.4%
18%
16%
Total Revenue
14%
12%
10%
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Source: Receipts from FY 2009 Historical Tables, Budget of the United States Government, Table 1.3., and U.S. Office of
Management and Budget, A New Era of Responsibility: Renewing America's Promise, 2009.
Taxes Per Household Have Risen Dramatically
Total Federal Tax Revenue per Household, 1965-2012 estimate
$25,000
Obama
Budget
Inflation-Adjusted Dollars (2008)
$22,500
$20,000
$17,500
Historical Average: $16,334
$15,000
Tax Revenue per
Household
$12,500
$10,000
1965
1970
1975
1980
1985
1990
1995
2000
Source: Receipts from FY 2009 Historical Tables, Budget of the United States Government, Table 2.1;
Households from U.S. Bureau of the Census and OMB Feb. 2009 Release.
2005
2010
Total Tax Burden Is Rising To Highest Level In History
Federal Tax Revenues as a Percentage of GDP, 1965-2082
25%
Percentage of GDP
23%
21%
Highest Tax Burden in U.S. History = 20.9%
19%
17%
15%
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Heritage Calculations Based on CBO Long-Term Budget Outlook, December 2007, OMB Feb. 2009 Release, and House
Budget Committee, Republican Budget Alternative
Total Tax Burden Is Rising To Highest Level In History
Federal Tax Revenues as a Percentage of GDP, 1965-2082
25%
Percentage of GDP
23%
21%
Highest Tax Burden in U.S. History = 20.9%
19%
30-Year Historical Tax Burden = 18.4%
17%
15%
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Heritage Calculations Based on CBO Long-Term Budget Outlook, December 2007, OMB Feb. 2009 Release, and House
Budget Committee, Republican Budget Alternative
Total Tax Burden Is Rising To Highest Level In History
Federal Tax Revenues as a Percentage of GDP, 1965-2082
Current Law:
2001 and 2003
Tax Cuts Expire
25%
Percentage of GDP
23%
21%
Highest Tax Burden in U.S. History = 20.9%
19%
30-Year Historical Tax Burden = 18.4%
17%
2009: 15.4%
15%
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Heritage Calculations Based on CBO Long-Term Budget Outlook, December 2007, OMB Feb. 2009 Release, and House
Budget Committee, Republican Budget Alternative
Total Tax Burden Is Rising To Highest Level In History
Federal Tax Revenues as a Percentage of GDP, 1965-2082
Current Law:
2001 and 2003
Tax Cuts Expire
25%
Percentage of GDP
23%
21%
Highest Tax Burden in U.S. History = 20.9%
19%
30-Year Historical Tax Burden = 18.4%
Extend All 2001
and 2003 Tax
Cuts and Index
AMT
17%
2009: 15.4%
15%
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Heritage Calculations Based on CBO Long-Term Budget Outlook, December 2007, OMB Feb. 2009 Release, and House
Budget Committee, Republican Budget Alternative
Total Tax Burden Is Rising To Highest Level In History
Federal Tax Revenues as a Percentage of GDP, 1965-2082
Current Law:
2001 and 2003
Tax Cuts Expire
25%
Percentage of GDP
23%
21%
President
Obama's
Budget
Highest Tax Burden in U.S. History = 20.9%
19%
30-Year Historical Tax Burden = 18.4%
Extend All 2001
and 2003 Tax
Cuts and Index
AMT
17%
2009: 15.4%
15%
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Heritage Calculations Based on CBO Long-Term Budget Outlook, December 2007, OMB Feb. 2009 Release, and House
Budget Committee, Republican Budget Alternative
Income Tax Receipts Stay Constant Even As Tax Rates Decline
Top Federal Indivdual Income Tax rates and Receipts, 1960-2009 estimate
90
1963:
91%
Vietnam War
Surtax: 77%
Top Individual Tax Rate (Percentage)
80
1981:
70%
70
60
1967:
70%
1986:
50%
50
1982:
50%
40
30
20
10
Income Tax
Receipts as
Percentage of
GDP
1988:
28%
1967: 7.6%
0
1960
1993:
39.6%
1965
1981: 9.4%
1970
1975
1980
1990:
28%
1986: 7.9%
1985
Individual Income
Tax Rate
2009:
35%
1992:
31%
2009:
6.7%
1992: 7.6%
1990
2003:
35%
1995
2003: 7.3%
2000
Source: The Tax Foundation, Federal Individual Income Tax Rate History, Income Years 1913-2009;
Receipts from FY 2009 Historical Tables, Budget of the United States Government, Table 2.3.
2005
The Tax Cuts Created Nearly 10 Million Jobs
Civilian Employment: Sixteen Years and Over (thousands)
147,000
145,000
146.3
million
jobs
143,000
141,000
Tax Cuts Signed
Into Law
May 28, 2003
140.2 million
jobs
139,000
137,000
136.6 million
jobs
135,000
2000 - Jan
2001 - Jan
135.7 million jobs
2002 - Jan
Source: Bureau of Labor Statistics
2003 - Jan
2004 - Jan
2005 - Jan
2006 - Jan
2007 - Jan
2008 - Jan
Threat From Spending
Federal Spending as a Percentage of GDP Under the Extended Baseline Scenario, 1980-2060
40
35
30
Interest
Tax Revenue Under
Current Law
25
Other Spending
20
Defense
15
Social Security
Medicaid
10
Medicare
5
0
1980
1990
2000
2010
2020
2030
2040
2050
Source: Heritage Calculations based on Office of Management and Budget and Congressional Budget Office data
2060
The Top 10 Percent Paid 71 Percent of Federal Income Tax