Brumbaugh, David L.

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Congressional Research Service  ̃The Library of CongressCRS Report for CongressReceived through the CRS Web98-230 EUpdated April 17, 1998The Level of Taxes in the United States, 1940-1997David L. BrumbaughSpecialist in Public FinanceEconomics DivisionSummaryIn Fiscal Year (FY) 1997, federal receipts as a percent of Gross Domestic Product(GDP) reached their highest level since World War II.  However, the peak is not adramatic one.  Indeed, compared to the size of the U.S. economy or compared toincomes, the overall level of federal taxes has remained relatively stable over the past 45years, generally hovering at just under 20% of Gross Domestic Product (GDP).  At thesame time, the composition of federal taxes has changed somewhat, generally shiftingaway from corporate income taxes and excise taxes towards social security taxes.Recent congressional activity has focused on the general level of taxes; H.J.Res. 111(Representative Barton) proposes a two-thirds majority be required for legislation thatwould increase taxes.  For additional information on tax limitation proposals, see: A TaxLimitation Amendment: Issues and Options Concerning a Super-majority Requirement.CRS Report 98-368 GOV, by James V. Saturno.  For more information on taxes ingeneral, see: Major Tax Issues in the 105  Congress.  CRS Issue Brief 98021, by thethTaxation and Government Finance Section, Economics Division.The Level of Taxes Compared to the Size of the EconomyThe level of taxes in the United States has recently been a focus of Congressionalactivity.  H.J.Res. 111 (introduced by Representative Barton) proposes an amendment tothe U.S. Constitution that would require a two-thirds majority for tax-increase legislationto be approved by either House of Congress.Compared to the size of the U.S. economy, the overall level of federal taxes hasremained relatively stable for the past 45 years.  Figure 1, below, shows federal receiptsas a percent of Gross Domestic Product (GDP) over the period 1940-1997; table 1 CRS-2Figure 1.  Federal Receipts as a Percent of GDP, Fiscal Years 1940 - 1997CRS-3Table 1.  Federal Receipts as a Percent of GDP, Fiscal Years 1940 - 1997Fiscal Year Income Taxes Taxes Taxes Taxes Other ReceiptsIndiviual Corporate Income Security Excise Total Social 1940 0.9% 1.2% 1.8% 2.0% 0.7% 6.7%1941 1.1 1.8 1.7 2.2 0.7 7.51942 2.2 3.2 1.7 2.3 0.6 10.11943 3.6 5.3 1.7 2.3 0.4 13.31944 9.5 7.2 1.7 2.3 0.5 21.21945 8.5 7.4 1.6 2.9 0.5 20.81946 7.4 5.5 1.4 3.2 0.6 18.01947 7.8 3.8 1.5 3.2 0.6 16.91948 7.6 3.8 1.5 2.9 0.6 16.41949 5.8 4.2 1.4 2.8 0.5 14.61950 5.8 3.8 1.6 2.8 0.5 14.51951 6.7 4.4 1.8 2.7 0.5 16.11952 8.0 6.1 1.8 2.5 0.5 18.91953 8.0 5.7 1.8 2.7 0.5 18.71954 7.8 5.6 1.9 2.6 0.5 18.51955 7.3 4.5 2.0 2.3 0.5 16.51956 7.5 4.9 2.2 2.3 0.5 17.51957 7.9 4.7 2.2 2.3 0.6 17.81958 7.6 4.4 2.4 2.3 0.6 17.41959 7.5 3.5 2.4 2.2 0.6 16.21960 7.9 4.1 2.8 2.3 0.8 17.81961 7.8 4.0 3.1 2.2 0.7 17.81962 8.0 3.6 3.0 2.2 0.7 17.61963 7.9 3.6 3.3 2.2 0.7 17.81964 7.6 3.7 3.4 2.1 0.7 17.61965 7.1 3.7 3.2 2.1 0.8 17.01966 7.4 4.0 3.4 1.7 0.9 17.41967 7.6 4.2 4.0 1.7 0.9 18.31968 7.9 3.3 3.9 1.6 0.9 17.61969 9.2 3.9 4.1 1.6 0.9 19.71970 9.0 3.3 4.4 1.6 0.9 19.11971 8.0 2.5 4.4 1.5 0.9 17.41972 8.0 2.7 4.5 1.3 1.0 17.61973 7.9 2.8 4.8 1.2 0.9 17.71974 8.3 2.7 5.2 1.2 1.0 18.31975 7.9 2.6 5.4 1.1 1.0 18.01976 7.6 2.4 5.2 1.0 1.0 17.2TQ 8.5 1.9 5.5 1.0 0.9 17.91977 8.0 2.8 5.4 0.9 1.0 18.01978 8.2 2.7 5.5 0.8 0.9 18.11979 8.7 2.6 5.6 0.8 0.9 18.61980 9.0 2.4 5.8 0.9 1.0 19.01981 9.4 2.0 6.0 1.3 0.9 19.71982 9.3 1.5 6.3 1.1 1.0 19.21983 8.4 1.1 6.1 1.0 0.9 17.61984 7.8 1.5 6.3 1.0 0.9 17.51985 8.2 1.5 6.5 0.9 0.9 17.91986 8.0 1.4 6.5 0.8 0.9 17.61987 8.5 1.8 6.6 0.7 0.9 18.61988 8.1 1.9 6.7 0.7 0.9 18.41989 8.3 1.9 6.7 0.6 0.9 18.51990 8.2 1.6 6.7 0.6 1.0 18.21991 8.0 1.7 6.8 0.7 0.9 18.01992 7.7 1.6 6.7 0.7 0.9 17.81993 7.9 1.8 6.6 0.7 0.8 17.81994 8.0 2.1 6.8 0.8 0.9 18.41995 8.2 2.2 6.7 0.8 0.9 18.81996 8.8 2.3 6.8 0.7 0.8 19.41997 9.3 2.3 6.8 0.7 0.8 19.8Source: Office of Management and Budget.  Budget of the United States Government, FY1998.  Historical Tables; U.S. Congressional Budget Office.Economic and Budget Outlook: Fiscal Years 1999 - 2008.CRS-4The receipts reported in figure 1 and table 1 include a small quantity of non-tax items in the1“other” category.  However, non-tax items comprise such a small portion of the total that given thisreport’s  level of generality, we use the terms “taxes” and “receipts” interchangeably.presents the corresponding data.   The numbers indicate that during World War II, taxes1increased from a pre-war level of about 7% of GDP to slightly over 20%.  Taxes fellimmediately after the war, but remained substantially above their pre-war level. For the next 5 decades, the level of taxes remained quite stable.  The average for thepost-World War II period has been 18.3% of GDP.  The lowest level was in 1950, at14.5%; the highest was  in 1997, at 19.8%.  However, these are small departures from theaverage, and most years remained quite close to the norm.  On average, each year’s levelof revenues has varied from the post-war mean by less than 1% of GDP.  The narrowrange of variation has been a consequence of both economic factors and conscious policydecisions.  For example, inflation helped push revenues to a peak in 1981, while theEconomic Recovery Tax Act of 1981 subsequently reduced them.Composition of Federal ReceiptsFigure 2, below, shows how the composition of federal receipts has changed sinceWorld War II; it presents the percent of federal receipts contributed by each majorcategory of taxes.  Over the past 50 years, corporate taxes and excise taxes have declinedin importance, while social insurance taxes (chiefly Social Security) have grownsubstantially.  Currently, the individual income tax still produces the most revenue and isfollowed in size by social insurance taxes.Figure 2.  Composition of Federal Receipts, Fiscal Years 1940 - 19971950 1960 1970 .1980 1990 1997Fiscal Year05101520253035   Federal Taxes    State TaxesPercent of GDPCRS-5The supporting data for figure 2 are not provided here, but can be found in table 2.2of the Historical Tables volume of the set of FY1999 budget documents released by theExecutive Office of the President in February, 1998.State and Local TaxesFigure 3 shows that state and local taxes have doubled, rising from 5.3% of GDP in1947 to 10.7% in 1997.  As a result, total taxes — federal and state taxes combined —have grown by 9 percentage points, or by well over a third of the 1947 level.  (As withfigure 2, the supporting data for figure 3 can be found in the Historical Tables of theFY1999 budget — in this case, table 15.1 on page 268.)  Note that the state and localreceipts shown in the figure do not include federal grants.Figure 3.  Federal and State and Local Taxes as a Percent of GDP, Fiscal Years 1947 - 1997

The Level of Taxes in the United States, 1940-1997

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The Level of Taxes in the United States, 1940-1997

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