Copyright ©2003, South-Western College Publishing Contemporary Economics: An Applications Approach By Robert J. Carbaugh 2nd Edition Chapter 9: The Mixed Economy of the United States

Carbaugh, Chap. 9 2 Functional distribution of income, 2000 The Mixed Economy: Households Source: Federal Reserve Bulletin, June 2001

Carbaugh, Chap. 9 3 Personal distribution of income The Mixed Economy: Households LowestSecondMiddleFourthTop Year20 percent20 percent20 percent20 percent20 percent %9.2%14.1%20.9%51.7% Money income before taxes Source: US Dept. of Commerce, Bureau of the Census

Carbaugh, Chap. 9 4 Households as spenders and savers, 1999 The Mixed Economy: Households AmountPercent (billions) of total Disposition of household income Personal consumption expenditures$6,26983% Personal taxes1,15215 Personal savings1482 7, Composition of personal consumption Expenditures Durable goods$76212% Non-durable goods1,85430 Services3, , Source: Economic Report of the President, 2001

Carbaugh, Chap. 9 5 US business firms in 1998 The Mixed Economy: Business Number ofBusiness firms (mill.)receipts (bill.) Form of businessNumberpercentDollarspercent Proprietorships16.972%$8435% Partnerships1.77%1,0426% Corporations4.821%14,89089% TOTAL %16,775100% Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

Carbaugh, Chap. 9 6 Growth of total government outlays, The Mixed Economy: Government Source: Economic Report of the President, various issues

Carbaugh, Chap. 9 7 Personal income taxes 50% Corporate income taxes 10% Excise, Customs, Estate, Gift and misc. taxes 8% Social Security, Medicare & other retirement taxes 32% Federal Receipts Federal government expenditures and receipts, 2000 Government Finance Social security, Medicare, & other retirement 48% National defense 16% Net interest on the debt 13% Other 13% Health 9% International affairs 1% Federal Expenditures Source: Economic Report of the President, 2001

Carbaugh, Chap. 9 8 Education 33% Highways 7% Other 44% Expenditures State and local receipts and expenditures, 1998 Government Finance Sales and Excise taxes 20% Other 29% Property tax 17% Revenue from the Federal Government 19% Corporate income tax 3% Receipts Individual income tax 12% Public welfare 16% Source: Economic Report of the President, 2001

Carbaugh, Chap. 9 9 Taxes and tax rates Taxation NationAverage tax rate Sweden63.0% France50.9 Italy46.8 Germany44.8 Canada43.4 United Kingdom40.6 United States34.4 Japan30.8 Singapore28.1 Hong Kong16.1 Total tax receipts as a percent of domestic output, 1999 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

Carbaugh, Chap Progressive, proportional & regressive taxes Taxation TotalTotalAverageMarginal incometaxes duetax ratetax rate Progressive tax $0$ %5% %15% %25% Regressive tax $0$ %30% %20% %10% Proportional tax $0$ %10% %10% %10% * In a progressive tax system, the average tax rate and marginal tax rate rise as income increases. * In a regressive tax system, the average tax rate and marginal tax rate fall as income increases. * In a proportional tax system, the average tax rate and marginal tax rate remain the same as income increases.

Carbaugh, Chap Federal income tax rates for a single taxpayer, 2000 Taxation Tax bracketTaxesAverageMarginal OverUp todue*tax ratetax rate $026,250$3,93815%15% 26,25063,55014,38223%28% 63,550132,60035,78727%31% 132,600288,35091,85732%36% 288,350and over39.6% * Computed at the top of the four lowest taxable Income brackets. Source: Internal Revenue Service, 2000 Tax Rate Schedules

Carbaugh, Chap Share of federal personal income tax paid by various income groups, 2000 Taxation Percentiles rankedAdjusted gross incomePercentage of federal adjusted gross incomethreshold on percentilespersonal income tax paid Top 1%$269,49635% Top 5%114,72954 Top 10%83,22065 Top 25%50,60783 Top 50%25,49196 Bottom 50%less than 25,4914 Source: US Congress, Joint Economic Committee, October 2000

Carbaugh, Chap Size of government in selected nations, 1999 Taxation Government expenditures as a percentage Nationof domestic output Sweden60.8% Denmark55.1 France54.3 Netherlands47.2 Germany46.9 Canada42.1 United Kingdom40.2 Japan36.9 Australia32.9 United States32.8 South Korea19.4 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

Carbaugh, Chap Progressive vs. flat-rate income tax Taxation 23,35056,550117,950256,500 15% 28% 31% 36% 39.6% 20% Progressive tax Flat-rate tax Tax rate

Carbaugh, Chap Taxes on goods & services as a share of total tax revenue Taxation Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000