Federal Reserve Economic Data

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Tumultuous tax brackets

U.S. income tax brackets have varied (sometimes wildly) over time

Income tax law is complex and many of its variables change over time. One much-discussed example is its progressivity―that is, how much the tax rate increases when taxable income increases. In the United States, this progression is determined by a system of brackets: Once a taxable income threshold is reached, any additional income is taxed at a higher rate (the so-called marginal tax rate). The number of those brackets, the incomes at which they kick-in, the associated tax rates, and what constitutes taxable income are all elements in the complex formula of taxes.

The graph shows just two elements of that formula: the first and the last marginal tax rates. This highlights how much these rates have varied through history (compared, let’s say, with the past decade or two) and also how high they have been. In 1944, for example, the top-bracket tax rate was 94%! It also shows that some changes were absolutely brutal: 1917 to finance WWI and 1932 to finance the New Deal. WWII, despite the high tax rates, was actually financed mostly through debt (war bonds), which required keeping tax rates high to pay it off.

How this graph was created: Search for “tax bracket,” select the series, and click on “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: IITTRHB, IITTRLB

Predicting the payroll employment numbers

Most people look forward to Fridays in general, but data analysts and economists eagerly await one in particular: the Friday when the BLS’s employment situation is published. Two headline figures in this release are the unemployment rate and total nonfarm payrolls. These numbers are still subject to revision after their initial release. For example, the payroll numbers are based on about 70% of the surveyed businesses, and that number gradually increases to about 94% through revisions. Thus, relying on this first release to tell the whole story may be a bit premature, given that something could be changed by the revisions.

ADP is a company that provides payroll services to many businesses. It uses its internal data, as well as other economic indicators, to predict a few days before the BLS’s release what the final payroll number will be. The graph here compares the BLS series (in red) and the ADP series (in blue) and shows that there are some spectacular hits…and misses. Note that the misses could be on either side―too high or too low―as both are imperfect measures. Yet, if both measures agree, that’s a strong indication that they hold some truth.

How this graph was created: Search for nonfarm payrolls, select the relevant series, and click on “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: NPPTTL, PAYEMS

War: Spending spikes and new steady states

Historical data on how conflict has changed U.S. government expenditures

History books are full of wars, and economic data are even categorized by their timing before and after wars. In this post, FRED taps into the NBER Macrohistory Database to track the expenditures of the U.S. federal government from 1879 to 1947—which includes plenty of conflict.

Obviously, these expenditures have grown tremendously because the U.S. has grown tremendously since its Civil War, in both population and per capita terms. But this growth hasn’t been uniform. Indeed, the major spikes are tied to the World Wars. The U.S. began its involvement in WWI in 1917, and its expenditures shot up until they peaked in December 1918. It took until the end of 1919 to reach a new steady state, but notice that the new steady state is at a significantly higher level than before the war. This pattern happened again with WWII: The major build-up started in 1941 as the U.S. became involved, peaked in 1945, then declined to a new steady state, which again is higher than the previous one. Note that there’s a comparatively small step-up in the 1930s. That’s the New Deal associated with the Great Depression. Not a war, but still a harrowing episode.

NOTE: You probably noticed the different colors along what looks like one continuous line. That’s because the graph was built with five different series that bear the same title. The NBER Macrohistory Database compiles data from multiple sources, and they don’t always agree and there are some overlapping observations. Hence, the different series are kept separate. But if you look carefully, the numbers are pretty close.

How this graph was created: Search for federal expenditures. The set of series should be grouped together among the choices (although maybe not at the top of the list). Check each of the series, then scroll back up and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: M1505AUSM144NNBR, M1505BUSM144NNBR, M1505CUSM144NNBR, M1505DUSM144NNBR, M1505EUSM144NNBR


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