William_T._Bianco,_David_T._Canon]_American_Polit

Tools and theories of economic policy 555

and (2) their redistributive nature—that is, whether a specific tax is regressive, neutral,

or progressive. There are four major types of federal taxes: personal income taxes,

corporate taxes, payroll taxes (for Social Security and Medicare), and excise taxes

(such as taxes on cigarettes, alcohol, gasoline, air travel, and telephone lines). The pie

charts in Figure 15.7 show how the distribution of tax revenue changed between 1962

and 2019. The proportion of personal income taxes held relatively steady, but excise

taxes and corporate taxes fell and payroll taxes more than doubled.

FIGURE

15.7

Revenues, 1962 Spending, 1962

Payroll

Taxes

17.1%

Spending, 2019

Individual

income taxes

45.7%

Corporate

Income Taxes

20.6%

Excise Taxes

and all other

16.6%

Excise Taxes

and all other

6.8%

Revenues, 2019

Individual

income taxes

50%

Corporate

Income Taxes

7.9%

Payroll taxes

35.3%

Defense

Discretionary

49.2%

Non-defense

Discretionary

18.3%

Social

Security

13.2%

All Other

Mandatory

12.8%

Net Interest

6.4%

Medicare

17.9%

Net Interest

8.9%

Non-defense

discretionary

15.9%

Defense

discretionary

15.3%

Social

Security

23.9%

Other

mandatory

9.1%

Medicaid

9.2%

Sources: Congressional Budget Office, Updated Budget Projections, 2016–2026, Table 1, p. 15, and Table 4, pp. 21–22, http://www.cbo.gov

(accessed 6/3/16); numbers for 2019 are from Congressional Budget Office, The Budget and Economic Outlook, 2018–2028, Table 2-1,

p. 44, Table 3-1, p. 67, http://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53651-outlook.pdf (accessed 4/24/18).

Federal Revenues and Spending, 1962 and 2019

A much larger share of tax revenue comes from payroll taxes than was true in the 1960s. What

implications does this have for the redistributive nature of federal taxes? What have been the biggest

changes since the 1960s in the way the federal tax dollar is spent? Are these trends likely to reverse or

continue in the next 30 years?

45%

of Americans pay no income tax.

Source: Tax Policy Center

DID YOU KNOW?

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