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Federal Taxes to GDP
About This Indicator
What Is This?
Federal revenue as a share of the economy, yearly since 1930, excluding state and local taxes: the Office of Management and Budget's receipts over the Bureau of Economic Analysis's GDP for the same fiscal year. OMB's own table can divide by an older GDP estimate, so a year can differ from its printed share by a tenth of a point.
Why Does It Matter?
The top income tax rate was 91% for most of the 1950s and 28% in the late 1980s, yet both times federal taxes took about one dollar of every six the country produced. The top rate hit only the highest incomes, so a headline rate can say little about the total.
Can Politics Influence It?
Lawmakers write the tax code; the economy decides what it collects. In a recession the share falls with no new law, as profits and capital gains shrink faster than the economy.
Key Idea
A steady total can hide a big change in who pays. From the early 1950s to the early 1980s, payroll taxes, taken straight from paychecks, grew from about a tenth of federal taxes to over a third, as the corporate share fell from over a quarter to under a tenth.
Not Scored
Source: FRED (OMB receipts and outlays); BEA (GDP). FYFR and FYONET over GDP.
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