I ran across something interesting recently while perusing numbers at the website of the White House Office of Management and Budget. The chart above was copy / pasted from chart titled “Receipts by Source” and shows all funds taken in by the U.S. Federal government in millions of dollars. Individual and Corporate Income Taxes titles are pretty self explanatory. “Social Insurance and Retirement Receipts” would presumably include Employee and Employer share of Social Security and Medicare payroll taxes, as well as Federal Unemployment Tax (FUTA), which is paid by the employer in states where applicable.
A few things stand out about this little chunk of data. Corporate and Personal Income Tax Receipts peaked in 2007, right before the worldwide financial crisis. Social Insurance and Retirement Receipts peaked in 2008, decreasing by only about 1% for 2009. Most of the drop here for 2011 can be explained by the 2% cut on employee’s share of the Social Security tax. Regardless of the reasons, total Social Insurance and Retirement Receipts changed (up or down) by less than 4% over the four years 2007-2010. Individual Income Taxes, by contrast, dropped by over 22% from 2007 to 2010, while Corporate Income Taxes dropped by over 62% in just 2 years, and was still less than half of the peak amount for 2011.
How can we reconcile the fact that total annual individual income taxes collected decreased by 22%+, or about $265 billion, while social insurance and retirement funds collected remained essentially flat? For 2007-2010, 12.4% of each dollar in wages (up to the following limits: 2007 – $97,500, 2008 – $102,000, ’09 & ’10 – $106,800) went to the U.S. Treasury as Social Security tax (6.2% each from employer and employee). There is no upper limit on Medicare withholding, which totals 2.9% of wages. Thus, a good share of the $265 billion in lost income tax receipts can be explained by decreased income earned above the $100,000–ish Social Security withholding limit. Another likely contributing factor is decreased tax receipts from capital gains tax, which can also be counted as individual income. As people in the lower income brackets rarely, if ever, realize much income from capital gains, this data suggests that most of the decreased tax revenue in this period was from individuals in the upper income brackets ($100,000+ per year gross income). This may be some good information to bring up when someone is talking about the ‘rich’ paying more than their share in taxes.
Looking at the data for corporate income taxes, amounts collected essentially dropped off a cliff (a fiscal cliff?) in 2008 and never came back. The kicker to this story is the fact that corporate profits rebounded, and are at record highs, while the taxes they paid stayed low. According to data at the St. Louis Federal Reserve, total corporate profits reached an all time record high in 2010, beat that record in 2011, and set another new record in 2012, yet corporate income taxes paid are less than half of the 2007 level.
Let’s apply logic any competent high school student could figure out, and presume if workers earning under $100,000 can have their SS / Medicare tax revenues remain flat, all individuals and corporations should be able to do the same with income tax. Keeping individual and corporate tax receipts at 2007 levels for 2008-2010, we come up with an extra $531 billion from individuals and $476 billion from corporations. A trillion here, a trillion there, and pretty soon you’re talkin’ some real money. That’s over $1 trillion in ‘lost’ tax revenues over 3 years. Not that the Feds necessarily need more money, but they can sure stop bitching about not having enough. They gave it to wealthy people and corporations. Also, the thought that corporate profit tax revenues lost will get collected from individuals as capital gains tax is a bit of a fallacy. Shares of a corporation can be owned by a taxpaying American citizen, but can just as easily be owned by a guy in France, the government of Iran or China, or a fireman’s pension fund in Germany, with these entities earning any profits.
The only reason these numbers are this way is because the corporate whore politicians in D.C. and their masters want them this way. The Federal debt, Federal budget deficit, ‘fiscal cliff’, sequester, and other contrived political theater bullshit going on is just cover for forcing austerity on the not-very-wealthy portion of the American public.
Additional Info in a previous post: https://zanesworld1.wordpress.com/2012/12/11/u-s-corporate-vs-personal-tax-ratesporate-tax-rates
To find source data (cannot link to it) : Go to Google. Type in “White House OMB”. Click on “Historical”. Click on Table 2.1.
For Corporate profit data: Go to Google. Type in “St Louis FRED”. Click on “FRED Graph”. Type in “Corporate Profit” in upper right search window.