Federal Tax Revenue as a percent of GDP

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My last set of graphs shows the decline of C corporations since the 1980s while the share of pass-through businesses increased. Pass-through businesses do not pay taxes through the corporate tax code but through individual tax code. Here are the three main sources of federal revenue (% of GDP) and you can see how corporate income tax receipts were greater in the decades between 1940-1980 but with very little change in the individual income tax receipts.

Data is from the Office of Management and Budget, Historical Tables, Table 2.3

10/3/2017 Fixed y-axis label to read % of GDP

Number of corporations has dropped since the 1980s

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Share of business returns filed by C corporations has dropped 16.6% to 4.9% 1980-2012 with sole proprietorships filing the majority of business returns. At the same time, the net income reported by C corporations has dropped since 1980 from 68.0% to 37.1% in 2012.

A simple matrix of business structures and Pass-Through Businesses: Data and Policy provide more information but one thing you need to know is:

The majority of companies in the United States are pass-through businesses. These businesses are not subject to the corporate income tax; instead, their income is reported on their owners’ tax returns and subject to the individual income tax.

Data Source: IRS https://www.irs.gov/uac/soi-tax-stats-integrated-business-data Table 1: Selected financial data on businesses. 

Marginal Combined Federal Taxes on a Family of Four

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I am graphing the marginal combined federal taxes on our single earner family of four with three different combinations of tax rates: 

1. Income only

2. Income & Payroll (the employee part of social security and medicare)

3. Income & Pay roll (both the employer and employee part of social security and medicare)

The marginal payroll tax rate for this family was 0 until 1979 when the taxable maximum income subject to the payroll tax was greater than this family's median income.

Keep in mind the Tax Policy Center calculate these rates for:

•  4 person family including a married couple with one earner
•  Itemized deductions are assumed to equal 23 percent of income through 1986 and 18 percent of income thereafter

Data: Historical Combined Income and Employee Tax Rates for a Family of Four; Historical Social Security and FICA Tax Rates for a Family of Four 

Average Federal Taxes on Family of Four

Another graph with the data from the Tax Policy Center this time the average combined federal tax rate on our proverbial family of four with three different incomes.

Data: Historical Combined Income and Employee Tax Rates for a Family of Four, also including Employer Tax Rates  

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BTW, I just wanted to let you know that over the next 6-months I am taking on taxes in the United States. I hope to create a collection of visualizations not unlike what I did with An Illustrated Guide to Income. If you wish to support this project and get a first look at the graphs as I make them, make a monthly pledge on Patreon.

Combined Federal Marginal Tax Rates on Family of Four

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Often in visualizations of taxes, including mine, the focus is on the highest rate on the highest incomes. The Tax Policy Center calculated the combined federal tax rate on a median income family. To compare I have included the combined tax rate for a family with twice the median income.

The rate is the marginal combined Federal Income and Social Security and Medicare (FICA) Employee and Employer Tax Rates. I think of this rate as for a self-employed earner since they have to pay both employer and employee taxes themselves.

Keep in mind the Tax Policy Center calculates these rates for:

• 4 person family including a married couple with one earner

• Itemized deductions are assumed to equal 23 percent of income through 1986 and 18 percent of income thereafter

Data: Historical Combined Income and Employee Tax Rates for a Family of Four, also including Employer Tax Rates