The deadline for filing personal income taxes is approaching fast, which you probably know. But how much do you know about the big picture for taxes? This FRED graph helps shed some light on the issue by showing the total amounts of federal taxes paid over the past 5 years, separated by the sources of those taxes. As of the fourth quarter of 2018, federal taxes amounted to over $2 trillion. Clearly, personal income taxes are far and away the largest contributor. Production taxes and import tariffs are now in second place, only recently surpassing corporate income taxes, which have decreased recently. In fourth place are taxes from the rest of the world.
Also, in the sample shown here, the recent tax reform is clearly visible, with dips in all sources of taxes from the fourth quarter of 2017 to the first quarter of 2018, with one exception: Production taxes and import tariffs increased from $133 billion to $149 billion, which partly accounts for the change in the rankings noted above.
How this graph was created: From the Federal Government Current Receipts and Expenditures release table, check the relevant series and click “Add to Graph.” Then, from the “Edit Graph” panel, open the “Format” tab, and select graph type “Area” and “Stacked.” You may have to move a series or two up in the order if their last value is missing.
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.”
The Tax Cuts and Jobs Act of 2017 applies to taxes starting in 2018, and the first quarterly data on tax revenue are in. This graph compares current tax revenue categories with categories for the previous year. Most noticeable are a major drop in corporate tax income and the increase in taxes from production and imports. (In the latter case, both excise tax income and import duty income increased.) These changes are actually quite impressive: -35% for corporate tax income, +16% for production and import tax income. Personal income taxes are slightly down while taxes on foreign entities follow trend. How does all this pan out in the aggregate? The thick black line reveals that overall tax receipts are down by close to 5%. Will this persist or is this a one-time event? Revisit this blog post in the coming months to see how this graph updates.