The Level of Taxes in the United States, 1940-2005

The Level of Taxes in the United States, 1940-2005

Order Code RS20087
Updated June 20, 2006
CRS Report for Congress
Received through the CRS Web
The Level of Taxes in the United States,
1940-2005
David L. Brumbaugh
Specialist in Public Finance
Government and Finance Division
Summary
The overall level of federal tax receipts has varied in recent years. After reaching
a post-World War II peak of 20.9% in fiscal year (FY) 2000, federal receipts as a
percentage of gross domestic product (GDP) fell for three consecutive years, declining
in 2004 to its lowest level since 1959 (16.3%) before rising again to 17.5% in 2005 —
a level close to its post-war average of 18.3%. The decline in receipts was attributed to
a variety of factors: slower economic growth, changes in the makeup of aggregate
income, and enacted tax-cut legislation. 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, but with individual income taxes remaining
the largest category over the post-World War II period. This report will be updated as
additional data become available.
The Level of Taxes Compared to the Size of the Economy
Although tax receipts have varied over the past few years, they have remained
relatively stable over the longer term. Figure 1 shows federal receipts as a percentage of
Gross Domestic Product (GDP) over the period 1940-2005; Table 1 presents the
corresponding data. The numbers indicate that during World War II, taxes increased from
a pre-war level of about 7% of GDP to 20.9% in 1944. Although tax receipts declined
immediately after the war, they remained substantially above their pre-war level.
For the next five 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
14.4%; receipts reached their highest level as a percentage of GDP in 2000 at 20.9%.
After reaching their peak in 2000, receipts declined for several years, reaching 16.3% in
2004, but then rose to 17.5% in 2005. These high and low points are relatively small
departures from the average, and most years remained quite close to the norm, within
3.0% of GDP from the long-term average. The narrow range of variation has been a
consequence of both economic factors and conscious policy decisions. For example,
Congressional Research Service ˜ The Library of Congress

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inflation helped push revenues, as a percentage of the economy, to a relative peak in 1981,
whereas the Economic Recovery Tax Act of 1981 subsequently reduced them. Similarly,
robust economic growth helped boost receipts to their record level in 2000, whereas the
subsequent tax cut bills and decline in economic growth reduced receipts in the next four
years.
Figure 1. Federal Taxes as a Percentage of Gross Domestic
Product, Fiscal Years 1940 - 2005

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Table 1. Federal Receipts as a Percentage of GDP, FY1940-FY2005
Social
Individual
Corporate
Excise
Total
Fiscal Year
Security
Other
Income Taxes Income Taxes
Taxes
Receipts
Taxes
1940
0.9
1.2
1.8
2.0
0.7
6.8
1941
1.2
1.9
1.7
2.2
0.7
7.6
1942
2.3
3.3
1.7
2.4
0.6
10.1
1943
3.6
5.3
1.7
2.3
0.4
13.3
1944
9.4
7.1
1.7
2.3
0.5
20.9
1945
8.3
7.2
1.6
2.8
0.5
20.4
1946
7.2
5.3
1.4
3.1
0.5
17.6
1947
7.7
3.7
1.5
3.1
0.6
16.5
1948
7.5
3.8
1.5
2.9
0.6
16.2
1949
5.7
4.1
1.4
2.8
0.5
14.5
1950
5.8
3.8
1.6
2.8
0.5
14.4
1951
6.7
4.4
1.8
2.7
0.5
16.1
1952
8.0
6.1
1.8
2.5
0.5
19.0
1953
8.0
5.7
1.8
2.6
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
16.6
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
7.5
4.4
2.4
2.3
0.6
17.3
1959
7.5
3.5
2.4
2.2
0.6
16.1
1960
7.9
4.2
2.8
2.3
0.8
17.9
1961
7.8
3.9
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
17.7
1969
9.2
3.9
4.1
1.6
0.9
19.7
1970
8.9
3.2
4.4
1.6
0.9
19.0
1971
8.0
2.5
4.4
1.5
0.9
17.3
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
7.8
2.6
5.4
1.1
1.0
17.9
1976
7.6
2.4
5.2
1.0
1.0
17.2
TQ
8.5
1.9
5.5
1.0
0.9
17.8
1977
8.0
2.8
5.4
0.9
1.0
18.0
1978
8.2
2.7
5.5
0.8
0.9
18.0
1979
8.7
2.6
5.6
0.7
0.9
18.5
1980
9.0
2.4
5.8
0.9
1.0
19.0

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Social
Individual
Corporate
Excise
Total
Fiscal Year
Security
Other
Income Taxes Income Taxes
Taxes
Receipts
Taxes
1981
9.4
2.0
6.0
1.3
0.9
19.6
1982
9.2
1.5
6.2
1.1
1.0
19.1
1983
8.4
1.1
6.1
1.0
0.9
17.5
1984
7.8
1.5
6.2
1.0
0.9
17.4
1985
8.1
1.5
6.4
0.9
0.9
17.7
1986
7.9
1.4
6.4
0.7
0.9
17.4
1987
8.4
1.8
6.5
0.7
0.9
18.4
1988
8.0
1.9
6.7
0.7
0.9
18.2
1989
8.3
1.9
6.7
0.6
0.9
18.4
1990
8.1
1.6
6.6
0.6
1.0
18.0
1991
7.9
1.7
6.7
0.7
0.9
17.8
1992
7.6
1.6
6.6
0.7
0.9
17.5
1993
7.8
1.8
6.5
0.7
0.8
17.6
1994
7.8
2.0
6.6
0.8
0.8
18.1
1995
8.1
2.1
6.6
0.8
0.9
18.5
1996
8.5
2.2
6.6
0.7
0.8
18.9
1997
9.0
2.2
6.6
0.7
0.8
19.3
1998
9.6
2.2
6.6
0.7
0.9
20.0
1999
9.6
2.0
6.7
0.8
0.9
20.0
2000
10.3
2.1
6.7
0.7
0.9
20.9
2001
9.9
1.5
6.9
0.7
0.9
19.8
2002
8.3
1.4
6.8
0.6
0.8
17.9
2003
7.3
1.2
6.6
0.6
0.7
16.5
2004
7.0
1.6
6.4
0.6
0.7
16.3
2005
7.5
2.3
6.5
0.6
0.7
17.5
Source: Office of Management and Budget, Budget of the United States Government, FY2005. Historical
Tables.

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Composition of Federal Receipts
Figure 2 shows how the composition of federal receipts has changed since World
War II; it presents the percentage of federal receipts contributed by each major category
of taxes. Over the past five and one-half decades, 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.
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 FY2007 budget documents released by the
Executive Office of the President.
Figure 2. Percentage Composition of Federal Receipts, Fiscal
Years 1940-2005

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State and Local Taxes
Figure 3 shows that state and local taxes have almost doubled, rising from 5.5% of
GDP in 1948 to 10.1% in 2005. As a result, total taxes — federal, and state and local
taxes combined as a percentage of GDP — have grown by 6.0 percentage points, or by
over a quarter of the 1948 level. (As with Figure 2, the supporting data for Figure 3 can
be found in the Historical Tables of the FY2007 budget — in this case, table 15.1 on page
308.) Note that the state and local receipts shown in the figure do not include federal
grants.
Figure 3. Federal and State and Local Receipts as a
Percentage of Gross Domestic Product, 1948-2005