October 1, 2022
On June 28, the nonpartisan Congressional Joint Committee on Taxation released an overview of the federal tax system (https://www.jct.gov/publications/2022/jcx-14-2022/). The appendices were the most interesting part of the report.
For example, in 2021 estate and gift tax collections reached $27 billion, the highest that figure has been since 2008 ($28 billion). Although that may sound like a lot of money, it was only 0.7% of total federal collections, barely a rounding error. Estate and gift taxes have always been the smallest federal revenue stream. In 1972 they were 2.6% of total federal revenue, and the share has never been higher. Since 2009 it has never exceeded 1.0%.
Income taxes are mostly paid by the very rich. The top 1.5% of taxpayers, some 2,752 total, accounted for 51.8% of all federal income tax paid. Those with less than $50,000 in income scored in the report as having a negative income tax rate, because as a group their tax credits exceeded their liabilities.
But income taxes are only 54.2% of federal tax receipts, and the next big- gest share (30.3%) comes from social insurance taxes. The burden for these taxes is quite dif- ferent. Here the top 1.5% pay only 9.5% of the total. Those earning $100,000 to $200,000 provide nearly a third of social insurance tax payments. Expanding the group to include those from $50,000 to $200,000 accounts for 54.6% of such tax payments.
In 2010 the income tax accounted for only 41.5% of federal tax receipts, and social insurance 40.0%. Since then the govern- ment has increased its dependence on income taxes while holding social insurance taxes steady, so that now there more than a 20-point gap in their relative shares. Corporate taxes began the century at 10.2% of federal receipts, fell to 7.6% as the dot-com bubble burst, rose to 14.4% in 2006 before falling down to 6.6% in the Great Recession. The current share of 9.2% is about average for this century.
Federal taxes as a percentage of gross domestic product came to 18.1% in 2021, a recovery from the 16.3% in the pandemic year of 2020. The long-term average since 1952 for federal taxation has been 17.3%, so current taxation levels are above average. The high water mark of 20.0% was set in 2000, just before the internet bubble collapsed.