Debt and Taxes
You think the national debt is bad now? Well…it is!
But it’s not a record. The U.S. national debt after World War II was even larger, as a percent of the overall economy. Recently, XooxleAnswers Research looked into the history of the national debt and came up with some surprising information on how the debt gets paid off…and who pays for it!
First, a look at historical U.S. debt as a percent of GDP.
It’s not hard to see how the debt spiked in the 1940s. Nor is it hard to guess why, since the country was paying the enormous cost of fighting a world war. Our current debt has some similar roots, since it’s funding not one but two wars, in Iraq and Afghanistan (three, if you count Libya).
But now have a look at income taxes over the same period. Income taxes are paid by individuals (and families, of course) and by businesses. Back in WWII, individual taxes and corporate taxes contributed about equally to national revenue. In 1940, your parents and grandparents, collectively, actually paid less income taxes than businesses.
|Individual Income Tax Revenue (billions)||Corporate Income Tax Revenue (billions)||Tax Ratio(individual to business)|
By 1950, individual taxpayers were kicking in one and a half times more than corporations — $15.76 billion for individuals vs $10.45 billion in corporate taxes.
Then it skyrocketed…twice as much in 1960, almost three times as much in 1970, four times in 1980 and five times as much in 1990, where it’s pretty much stayed for the past few decades.
Let me say it again. Individual taxpayers — who used to pay about the same amount in tax revenue as business taxpayers — now pay five times as much.
What changed? Take a look at the effective tax rates for corporations…the amount of tax they paid relative to their profits:
Source: Economic Report of the President, Table B90: http://www.gpoaccess.gov/eop/tables11.html#erp7
Difficult as it might be to believe, businesses used to pay 45% or more of their profits as income tax. The overall tax rate has dropped in half over the years, starting around 1980, reaching its all time low of 20% in 2009.
I got a NY Times letter, Fairer Share of Tax Burden, out of all this.