The Level of Taxes in the United States, 1940-1997

The Level of Taxes in the United States, 1940-1997

98-230 E
Updated April 17, 1998
CRS Report for Congress
Received through the CRS Web
The Level of Taxes in the United States, 1940-1997
David L. Brumbaugh
Specialist in Public Finance
Economics Division
Summary
In Fiscal Year (FY) 1997, federal receipts as a percent of Gross Domestic Product
(GDP) reached their highest level since World War II. However, the peak is not a
dramatic one. Indeed, compared to the size of the U.S. economy or compared to
incomes, the overall level of federal taxes has remained relatively stable over the past 45
years, generally hovering at just under 20% of Gross Domestic Product (GDP). At the
same time, the composition of federal taxes has changed somewhat, generally shifting
away from corporate income taxes and excise taxes towards social security taxes.
Recent congressional activity has focused on the general level of taxes; H.J.Res. 111
(Representative Barton) proposes a two-thirds majority be required for legislation that
would increase taxes. For additional information on tax limitation proposals, see: A Tax
Limitation Amendment: Issues and Options Concerning a Super-majority Requirement.
CRS Report 98-368 GOV, by James V. Saturno. For more information on taxes in
general, see: Major Tax Issues in the 105 Congress
th
. CRS Issue Brief 98021, by the
Taxation and Government Finance Section, Economics Division.
The Level of Taxes Compared to the Size of the Economy
The level of taxes in the United States has recently been a focus of Congressional
activity. H.J.Res. 111 (introduced by Representative Barton) proposes an amendment to
the U.S. Constitution that would require a two-thirds majority for tax-increase legislation
to be approved by either House of Congress.
Compared to the size of the U.S. economy, the overall level of federal taxes has
remained relatively stable for the past 45 years. Figure 1, below, shows federal receipts
as a percent of Gross Domestic Product (GDP) over the period 1940-1997; table 1
Congressional Research Service ˜ The Library of Congress

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Figure 1. Federal Receipts as a Percent of GDP, Fiscal Years 1940 - 1997

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Table 1. Federal Receipts as a Percent of GDP, Fiscal Years 1940 - 1997
Social
Indiviual
Corporate Income
Security
Excise
Total
Fiscal Year
Income Taxes
Taxes
Taxes
Taxes
Other
Receipts
1940
0.9%
1.2%
1.8%
2.0%
0.7%
6.7%
1941
1.1
1.8
1.7
2.2
0.7
7.5
1942
2.2
3.2
1.7
2.3
0.6
10.1
1943
3.6
5.3
1.7
2.3
0.4
13.3
1944
9.5
7.2
1.7
2.3
0.5
21.2
1945
8.5
7.4
1.6
2.9
0.5
20.8
1946
7.4
5.5
1.4
3.2
0.6
18.0
1947
7.8
3.8
1.5
3.2
0.6
16.9
1948
7.6
3.8
1.5
2.9
0.6
16.4
1949
5.8
4.2
1.4
2.8
0.5
14.6
1950
5.8
3.8
1.6
2.8
0.5
14.5
1951
6.7
4.4
1.8
2.7
0.5
16.1
1952
8.0
6.1
1.8
2.5
0.5
18.9
1953
8.0
5.7
1.8
2.7
0.5
18.7
1954
7.8
5.6
1.9
2.6
0.5
18.5
1955
7.3
4.5
2.0
2.3
0.5
16.5
1956
7.5
4.9
2.2
2.3
0.5
17.5
1957
7.9
4.7
2.2
2.3
0.6
17.8
1958
7.6
4.4
2.4
2.3
0.6
17.4
1959
7.5
3.5
2.4
2.2
0.6
16.2
1960
7.9
4.1
2.8
2.3
0.8
17.8
1961
7.8
4.0
3.1
2.2
0.7
17.8
1962
8.0
3.6
3.0
2.2
0.7
17.6
1963
7.9
3.6
3.3
2.2
0.7
17.8
1964
7.6
3.7
3.4
2.1
0.7
17.6
1965
7.1
3.7
3.2
2.1
0.8
17.0
1966
7.4
4.0
3.4
1.7
0.9
17.4
1967
7.6
4.2
4.0
1.7
0.9
18.3
1968
7.9
3.3
3.9
1.6
0.9
17.6
1969
9.2
3.9
4.1
1.6
0.9
19.7
1970
9.0
3.3
4.4
1.6
0.9
19.1
1971
8.0
2.5
4.4
1.5
0.9
17.4
1972
8.0
2.7
4.5
1.3
1.0
17.6
1973
7.9
2.8
4.8
1.2
0.9
17.7
1974
8.3
2.7
5.2
1.2
1.0
18.3
1975
7.9
2.6
5.4
1.1
1.0
18.0
1976
7.6
2.4
5.2
1.0
1.0
17.2
TQ
8.5
1.9
5.5
1.0
0.9
17.9
1977
8.0
2.8
5.4
0.9
1.0
18.0
1978
8.2
2.7
5.5
0.8
0.9
18.1
1979
8.7
2.6
5.6
0.8
0.9
18.6
1980
9.0
2.4
5.8
0.9
1.0
19.0
1981
9.4
2.0
6.0
1.3
0.9
19.7
1982
9.3
1.5
6.3
1.1
1.0
19.2
1983
8.4
1.1
6.1
1.0
0.9
17.6
1984
7.8
1.5
6.3
1.0
0.9
17.5
1985
8.2
1.5
6.5
0.9
0.9
17.9
1986
8.0
1.4
6.5
0.8
0.9
17.6
1987
8.5
1.8
6.6
0.7
0.9
18.6
1988
8.1
1.9
6.7
0.7
0.9
18.4
1989
8.3
1.9
6.7
0.6
0.9
18.5
1990
8.2
1.6
6.7
0.6
1.0
18.2
1991
8.0
1.7
6.8
0.7
0.9
18.0
1992
7.7
1.6
6.7
0.7
0.9
17.8
1993
7.9
1.8
6.6
0.7
0.8
17.8
1994
8.0
2.1
6.8
0.8
0.9
18.4
1995
8.2
2.2
6.7
0.8
0.9
18.8
1996
8.8
2.3
6.8
0.7
0.8
19.4
1997
9.3
2.3
6.8
0.7
0.8
19.8
Source: Office of Management and Budget. Budget of the United States Government, FY1998. Historical Tables; U.S. Congressional Budget Office.
Economic and Budget Outlook: Fiscal Years 1999 - 2008.

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presents the corresponding data. The numbers indicate that during World War II, taxes
1
increased from a pre-war level of about 7% of GDP to slightly over 20%. Taxes fell
immediately after the war, but remained substantially above their pre-war level.
For the next 5 decades, the level of taxes remained quite stable. The average for the
post-World War II period has been 18.3% of GDP. The lowest level was in 1950, at
14.5%; the highest was in 1997, at 19.8%. However, these are small departures from the
average, and most years remained quite close to the norm. On average, each year’s level
of revenues has varied from the post-war mean by less than 1% of GDP. The narrow
range of variation has been a consequence of both economic factors and conscious policy
decisions. For example, inflation helped push revenues to a peak in 1981, while the
Economic Recovery Tax Act of 1981 subsequently reduced them.
Composition of Federal Receipts
Figure 2, below, shows how the composition of federal receipts has changed since
World War II; it presents the percent of federal receipts contributed by each major
category of taxes. Over the past 50 years, corporate taxes and excise taxes have declined
in importance, while social insurance taxes (chiefly Social Security) have grown
substantially. Currently, the individual income tax still produces the most revenue and is
followed in size by social insurance taxes.
Figure 2. Composition of Federal Receipts, Fiscal Years 1940 - 1997
1 The receipts reported in figure 1 and table 1 include a small quantity of non-tax items in the
“other” category. However, non-tax items comprise such a small portion of the total that given this
report’s level of generality, we use the terms “taxes” and “receipts” interchangeably.

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The supporting data for figure 2 are not provided here, but can be found in table 2.2
of the Historical Tables volume of the set of FY1999 budget documents released by the
Executive Office of the President in February, 1998.
State and Local Taxes
Figure 3 shows that state and local taxes have doubled, rising from 5.3% of GDP in
1947 to 10.7% in 1997. As a result, total taxes — federal and state taxes combined —
have grown by 9 percentage points, or by well over a third of the 1947 level. (As with
figure 2, the supporting data for figure 3 can be found in the Historical Tables of the
FY1999 budget — in this case, table 15.1 on page 268.) Note that the state and local
receipts shown in the figure do not include federal grants.
Figure 3. Federal and State and Local Taxes as a Percent of GDP,
Fiscal Years 1947 - 1997
Percent of GDP
35
30
25
20
15
10
5
0
1950
1960
1970
.
1980
1990
1997
Fiscal Year
Federal Taxes
State Taxes