Federal Revenue and Spending: A Book of Charts Rea Hederman, Michelle Muccio, and Alison Acosta Fraser The Heritage Foundation

Federal Revenue

Total Federal Revenue as a Percentage of GDP, * Since World War II, tax receipts have averaged around 18 percent of GDP. Tax receipts in 2005 surpassed the 60-year average and are set to rise in future years. *2007 estimated figures

Federal Revenue, by Major Source, * Government revenue soared by more than $1.7 trillion since 1965, in part because top marginal income, capital gains, and corporate tax rates were cut. *2007 estimated figures Data are inflation-adjusted in 2006 dollars.

Corporate Income Tax Receipts as a Share of GDP, The economy has boomed since the 2003 tax cuts, leading to the highest level of corporate tax receipts in over 20 years.

Type of Taxes as a Percentage of Overall Federal Revenue, 2006 Social insurance taxes sharply increased over the past 25 years because of a large hike in Social Security and Medicare payroll taxes. Yet without reforms, higher social insurance taxes will be needed to pay for growing, entitlement costs.

Average Federal Revenue per Household, by Administration American households are sending more of their income to Washington even with the 2001 and 2003 tax cuts. For 2006, the average household will pay $20,664, down from $22,647 in 2000 but much higher than $13,017 in * Data are inflation-adjusted in 2006 dollars.

Average Federal Revenue per Household, by Administration The average American household tax burden increased steadily since 1965, rising 20 percent during the Clinton Administration. Today's tax burden remains higher than all administrations except for Clinton's, even with the recent tax cuts. * Data are inflation-adjusted in 2006 dollars.

Taxes and Tax Rates

Top Federal Individual Income Tax Rates and Receipts, The most dramatic decline in the top individual income tax rate occurred during the Reagan Administration - it fell from 70 percent to 28 percent.

Top Federal Corporate Income Tax Rates and Receipts, * The top corporate tax rate, like the top individual rate, was reduced the most under President Reagan, from 46 percent to 34 percent. Today, with a combined federal and state tax rate of 39 percent, it is the highest corporate tax rate in the developed world. * 2007 estimated figures

Average Effective Federal Tax Rates on Households by Income Rank, 1983 and 2004 The share of taxes paid by the top 20 percent of income earners increased by almost 5 percent between 1983 and 2004, while the share paid by the bottom 20 percent of income earners decreased by almost 51 percent.

Percent of Federal Income Tax Paid in 2004, by Household Percentage Group The top 1 percent of income earners, by household, paid 37 percent of all federal income taxes in 2003; the bottom 50 percent paid a little over 3 percent.

Federal Spending

Total Federal Spending, estimate, with Congressional Leadership Real annual federal spending more than tripled since 1965 and nearly doubled since * Data are inflation-adjusted in 2006 dollars.

Percentage Growth of Federal Spending and Inflation (CPI), * Total nominal spending increased over 2,000 percent since 1965, while the Consumer Price Index (CPI) increased a relatively modest 500 percent. Less than half of the increase in federal spending came from defense and homeland security spending. *2007 estimated figures Data are not inflation-adjusted.

Total Federal Spending Per Household, estimate The Bush Administration has presided over one of the sharpest growths in spending per household since the Johnson Administration, when Great Society programs were enacted. * Data are inflation-adjusted in 2006 dollars.

Average Federal Spending per Household, by Administration Federal spending per household soared by more than $8,000 between the administrations of President John F. Kennedy and President George W. Bush. * Data are inflation-adjusted in 2006 dollars.

Total Federal Spending and Median Income, Federal spending increased 250 percent since 1965, five times faster than median income, which rose just over 40 percent. * Data are inflation-adjusted in 2005 dollars.

Defense and Non-Defense Discretionary Spending, * Non-defense discretionary spending increased almost continuously -- a total of 190 percent since while inflation-adjusted discretionary defense spending fluctuated widely. * 2007 estimated figures Data are inflation-adjusted in 2006 dollars.

National Defense Spending, * At 4 percent of GDP, defense spending is one and a half percentage points of GDP below the 45-year historical average and well below Cold War and Vietnam War levels. *2007 estimated figures

Total Discretionary Spending vs. Mandatory Spending, * Discretionary spending -- the portion of the budget subject to annual review and appropriation -- has risen 112 percent since Mandatory spending, consisting mostly of entitlements not subject to annual review and appropriation, has risen 603 percent since enactment of two Great Society programs, Medicare and Medicaid, in *2007 estimated figures Data are inflation-adjusted in 2006 dollars.

Total Mandatory Spending, Excluding Net Interest, * Mandatory spending, which is not subject to annual review and appropriations, grew in inflation- adjusted dollars from $204 billion in 1965 to $1.4 trillion in * 2007 estimated figures Data are inflation-adjusted in 2006 dollars.

Mandatory Spending per Household, estimate Mandatory spending per household increased over $8,514 since 1965, with 52 percent of that increase occurring between 1965 and Data are inflation-adjusted in 2006 dollars.

Total Federal and Combined State and Local Spending per Household, * The total spending burden on American households grew 84 percent since State and local spending per household increased 103 percent, while federal spending increased 74 percent. * 2007 estimated figures Data are inflation-adjusted in 2006 dollars.

Budget Comparisons

Total Federal Tax Revenue and Spending, * Since 1965, federal tax revenue and spending soared, increasing by over $1.7 trillion and almost $2 trillion, respectively. The government spent more than it took in during the vast majority of this period, generating an average annual deficit of $230 billion from * 2007 estimated figures Data are inflation-adjusted in 2006 dollars.

Change in Average Revenue and Spending, by Administration Spending growth typically increases faster than revenue growth, as seen in five of the last eight administrations. * Data are inflation-adjusted in 2006 dollars.

Average Federal Budget Surplus or Deficit as a Percentage of GDP, by Administration Since the 1960s, deficits driven largely by increased levels of spending have been the norm, while surpluses were a transient exception. The current 2006 deficit percent of GDP -- is slightly below the 45-year historical average of 2.2 percent of GDP.

Number of Presidential Vetoes, By Administration The last nine presidents have used their veto power sparingly.

Number of Presidential Vetoes, By Administration President Reagan vetoed more bills than any other president in the past 40 years, while President George W. Bush vetoed only one bill despite over 100 veto threats.

Number of Pork Projects, Earmarks, or "pork"projects, proliferated in recent years. There were more earmarks in 2005 than from 1991 to 1999 combined. However, the dramatic decrease in pork projects in 2007 is a result of the moratorium on earmarks, inserted in the legislation that funded the remaining nine appropriations bills for fiscal 2007.

Projected Spending

Debt Held By Public as a Percentage of GDP, * The current debt burden from publicly held debt is almost 9 percentage points below the historical average of 46 percent of GDP. Debt from World War II was not structural, and high relative debt levels gradually declined over the next 20 years. *2007 estimated figures

Federal Spending as a Percentage of GDP Using CBO Baseline, Since the early 1960s, federal spending historically consumed, on average, around 20 percent of GDP. However, the three big entitlement programs -- Medicare, Medicaid, and Social Security -- are projected to explode as baby boomers retire. Even if "defense" spending and "other" (non-defense discretionary and small entitlement) spending decline as a share of GDP, rapid growth in the three big entitlements will cause the federal budget to reach 38 percent of GDP.

Federal Budget Deficit as a Percentage of GDP, If federal spending continues on its current steep trajectory, the budget deficit is projected to grow 646 percent by 2050, reaching 19 percent of GDP by well above the 45-year historical average of 2.2 percent. Structural deficits at this size -- driven by entitlement spending in Social Security, Medicare, and Medicaid -- have never been seen in the U.S. and illustrate the need to reform these programs.

Federal Spending as a Percentage of GDP with Constant Discretionary Spending, If "defense" and "other" spending are held constant at current levels of GDP rather than declining, total government spending will reach 47 percent of GDP by 2050.

Spending as a Percentage of GDP with Constant Discretionary Spending, Letting all the 2001 and 2003 tax cuts expire will not solve the spending imbalance. Expenditures will reach 40 percent of GDP, while tax revenues will soar to 24 percent -- rates never sustained in the U.S. before. Total federal spending today consumes around 20 percent of GDP.

Federal Tax Revenues as a Percentage of GDP, Under current law, revenues are expected to skyrocket to 24 percent of GDP. Extending the tax cuts will shave less than 1 percentage point of GDP off this burden. AMT and real bracket creep are the biggest drivers of this rising tax burden.

Spending on Three Entitlements as a Percentage of GDP, Pressure from entitlements, fueled by demographic changes and rising heath care costs, will cause federal spending to explode. Medicaid spending will nearly triple -- increasing by 170 percent. Medicare will more than triple -- increasing by 220 percent.

Federal Spending for Mandatory and Discretionary Programs, * Since enactment of Medicare and Medicaid by President Johnson in 1965, total mandatory spending has doubled. As baby boomers retire and become eligible for Social Security, Medicare, and Medicaid, entitlements eventually will crowd out all other spending unless these programs are changed. *2007 estimated figures

Three Major Entitlements and Tax Revenues as a Percentage of GDP, Spending for the three major entitlements -- Medicare, Medicaid, and Social Security -- will more than double by At this rate and without major reforms, entitlement spending is set to consume all federal tax revenues.