Fun with Charts & Graphs: Contextualization of U.S. National Taxation & Debt, c. 1920 thru Present [revised]

(Note: I've revised this post and added material about 4 hours after my initial posting - I want to be sure that the post is long enough to keep your attention..)

Happy Tax Day! Remember: The IRS Loves You, Baby.

Belated wishes, anyway. I meant to post this yesterday.

Still, in the spirit of the celebration (which properly speaking ought to be marked with an octave..) I present you all some pertinent charts, mostly from this excellent site: Visualizing Economics.

As always, you may click on the images to expand them.


First item, a chart of the top marginal rates of the three major sorts of U.S. Federal income taxes - personal income, corporate income and capital gains (tax on investment gains) taxes - since 1910:

This all is still only a snapshot, there's of course much more to the overall story, such as questions concerning the percentages of the lower brackets, the adjusted dollar benchmarks for all brackets, as well as issues such as tax shelters and deductions and other complications in the code cannot that be crammed into one or any graph.. So it's all more complex than this graph can represent.

The graph "Lower Taxes for the Highest Earners" below and this explanation of the chart from the Visualizing Economics website explicate those complications a bit:

Green line is the top marginal rate for married couples filing jointly (most years dividends were tax like ordinary income until 2003), orange is the top rate for income from capital gains. The top corporate tax rate is included for comparison. Your marginal tax rate is the rate you pay on the “last dollar” you earn; but when you view the taxes you paid as a percentage of your income, your effective tax rate is less than your marginal rate, especially after you take into account the deductions and exemptions, i.e. income that is not subject to any tax.

Over the years, changing the amount of taxes people pay was accomplished not just by changing rates but by changing the income limits of the tax brackets. Just looking at the top rates does not give the whole picture about who is paying taxes. Before the 1986 tax reform, the income tax had 15 brackets. In the 1930s, there were more than 50. The Wealth Tax Act of 1935, applied the top rate to income over $5 million and had only a single taxpayer: John D. Rockefeller, Jr. As the number of tax brackets decrease, the the top rate was applied to more people over the decades. Since 1987 the income tax brackets were combined so now more than a million people “qualify” for the top marginal rate. If you are interested here is the first 1040 form for 1913.


The main thing to note is how the top marginal personal and corporate income taxes were *much* higher in the booming 40's & 50's through to the Reagan "Supply Side" Tax Break Revolution 1981.

The top marginal bracket peaked in the mid 90's and then settled at 90% from the early 50's until 1964. Those were the tax rates during the most expansive economic boom in human history, in the richest country in the world.

Here are two charts that put us into an international context:

First, an international comparison of both corporate and personal income tax rates:

Notice that the United States has relatively high corporate taxes, and low personal income taxes in international terms.


Next, I give you a narrower international comparison of the percentage of the GDP (tax-to-GDP ratio) taken by governments in tax revenue:

Today, Denmark is the most taxed country in the world with a tax-to-GDP ratio of only 48.9%. While as you see here, the U.S. tax-to-GDP ratio hovers in the low to mid 20 percentiles.

Comparatively, amongst first world nations, the United States takes a very low percentage of GDP as taxes..


Interestingly, I found this graph which says that Danes report being the happiest people on earth, somewhat happier than Americans, despite making less and being taxed more:

They also report being equally happy, rich or poor, which is atypical.


Now, take that very first chart of American income tax history above, and compare it with these next two showing the national debt explosion over the same time period:

Some observations:

We now are at a similar level of debt in comparison to our GDP as we held during WW II.

Also, there seems to be some odd correlation between cutting taxes and our exploding debt.

Note 1981, which is the year of Reagan's tax reform. The debt explosion began there, briefly improves under Clinton and the economic boom of the late 90's, and then explodes again under Bush and then Obama.

Can anyone say "voodoo economics" or supply side catastrophe? Can you say trillions of dollars blown into the sands of Iraq and Afghanistan?

I knew you could.


Here's another interesting chart, showing a graph of the percentage of capital gains as a percentage of all national income against a chart of federal budget surpluses and deficits by year:

Note here how the late 90's surge in investment income (the tech bubble) corresponded with a series of Federal Budget surpluses under Clinton, but that the housing bubble surge under Bush did not.


This next chart gives a bit of perspective on the issue of tax brackets, lacking in the very first chart:

Notice how the income tax is still hugely regressive, in that the people making tens of millions (the upper 1%) pay less than 40% (and still can shelter much of that), while the lowest earners making tens of thousands still pay over ten percent..


Wikipedia has some interesting data on poverty in the United States, saying that it's cyclical in nature with roughly 13 to 17% of Americans living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some point within a 10-year time span. Poverty is defined as the state of one who lacks a usual or socially acceptable amount of money or material possessions. Approximately 43.6 (14.3%) million Americans were living in poverty in 2009, up from 39.8 million (13.2%) in 2008. Also note, and to put all of this into further context, that the poverty threshold in the United Sates in 2009 for a single person under 65 was US$11,161; the threshold for a family group of four, including two children, was US$21,756.

This last graph shows how that compares to poverty internationally:

Blue is good, yellow and orange not so much, red is very bad.


National estimates are based on population-weighted subgroup estimates from household surveys. Definitions of the poverty line may vary considerably among nations. For example, rich nations generally employ more generous standards of poverty than poor nations. Thus, the numbers are not comparable among countries.

The common international poverty line has in the past been roughly US$1 a day. In 2008, the World Bank came out with a revised figure of US$1.25 at 2005 purchasing-power parity..

Try driving your SUV to the McDonald's drive trough on $1.25 a day. You could fill the tank maybe half full once a month in the few before the repo men come, and starve.. Or else walk, and then when you got there you'd be able to buy one item off the dollar menu.

Accentuate the positive, you'd burn off flab.

But that's just a fantasy. You make US$8.50 an hour at Walmart. And you can still get a plum job at the U.S. Post Office, so no worries! They start you at $19 an hour and the median pay is well above that! You'll get benefits and a Federal pension too!

So cheer up my fellow Americans! Don't be glum! Life isn't so bad! Not when you can afford to send a check for thousands of dollars to the IRS to do your part in helping bail out Wall Street and pay bankers their well deserved bonuses! And still own a car and shop at an American supermarket and eat out once in a while..


I close with a really funny set of maps. These demonstrate in yet another way how weird our politics are. I'm going to use the first graphic again later, because I have another post in mind that will discuss how warped people's voting is, in terms of how their ideological discourse and voting habits often diverge from their economic interests.

Click to enlarge and read it:

The two maps are a bit confusing. Look at the chart at the bottom of the graphic that gives the proportion of taxes paid to benefits received. Then compare it with this map, the electoral results for the last (2008) presidential election, red states McCain, Blue Obama:

See the joke? States that voted for McCain and the Republican line (lie) of smaller government and forever lower taxes almost all get a much greater return on their tax input than do most states state that voted for Obama and "socialism."

New Mexico, which gets the highest return per dollar sent (2 to 1) hung in the balance and I think had a recount, so it's a near exception. My home state Maine, is a clear exception - voted Obama, and get the cash for our vote. We also have two of the most powerful - moderate female Republican - senators in the country, Collins and Snowe, whom I bet account for much of that money in pork.. Most of the other exceptions who voted for Obama and get slightly over parity on their return for the tax dollar (e.g. Iowa, Pennsylvania, Missouri) are close calls electorally and have recently been skewing Republican.

I think the overall pattern can be explained by senators from small states getting the goods for their constituents, ideological blather aside. They have much more influence per taxpayer head than senators from large, and they use it. Texas you'll notice is also an outlier, but has 24 million people for its 2 senators. Maine has 1.25 million for its 2. This disparity in the senate favors states with small (and incidentally mostly rural - look at the federal farm bill for a graphic demonstration of this effecting federal cash flow) constituencies.. That's the raw brutal math.

This disparity amuses me immensely. The banker and bubba both howl against "socialism" and then take the taxpayer to the cleaners with a crowbar up side the head.


God bless America. Land that I love.


The American dream's still alive. Yippee kay yay, eh?



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