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Who pays what in federal taxes?

Summary:
[embedded content] In principle, we all have to pay taxes. That includes individuals and corporations. The graph attempts to answer the question of how much each source provides in federal taxes. It’s clear that individuals pay the lion’s share (which doesn’t include social security contributions), and the second-largest source is corporations. The third-largest source is tariffs on imported goods and taxes levied at production. Now, who precisely “pays” these types of taxes is more difficult to determine, as it depends on the price elasticities involved. Let’s say a tariff increases or a new tariff is imposed. Does the seller absorb it or does the seller roll it over to consumers through a higher price tag? The answer depends on how sensitive each party is to price changes. The

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In principle, we all have to pay taxes. That includes individuals and corporations. The graph attempts to answer the question of how much each source provides in federal taxes. It’s clear that individuals pay the lion’s share (which doesn’t include social security contributions), and the second-largest source is corporations.

The third-largest source is tariffs on imported goods and taxes levied at production. Now, who precisely “pays” these types of taxes is more difficult to determine, as it depends on the price elasticities involved. Let’s say a tariff increases or a new tariff is imposed. Does the seller absorb it or does the seller roll it over to consumers through a higher price tag? The answer depends on how sensitive each party is to price changes.

The smallest source of taxes is the entities abroad category. These entities may be expats filing their income taxes or businesses with some ties to the U.S. that must pay taxes on their activities.

What are the overall trends? It’s clear that taxes from individuals have had a tendency to increase. Taxes from tariffs and such have tended to decrease, although they may soon go back up. Corporate income taxes have also decreased, proportionally, and are now very close to being overtaken by taxes from tariffs and such. Note also that corporate income taxes dip significantly during recessions: These taxes are mostly based on profits, and profits don’t usually rise during downturns. Finally, taxes from foreign entities are small but have recently started to become noticeable.

How this graph was created: Search for “federal tax receipts” and click on any of the relevant results. Scroll to the bottom of the note and click on the release table. Check the series you want and click on “Add to Graph.” Because the latest taxes on corporate income weren’t yet available as this post was being written, we adjusted the date to remove the last quarter. From the “Edit Graph” panel, change type to “Area” and units to “Percent.”

Suggested by Christian Zimmermann.

About FRED Blog
FRED Blog
The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.

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