It's the Economy! (Stupid)

"A universally helpful and insightful book. I particularly liked the straightforward charts and summary points. It should be a reference manual for everyone interested in the US economy."

David Gamble
Former Chief Executive
British Airways Pension
Investment Management Ltd

(excerpt from the book...)

Show Me the Money! - The IRS Data

Before going into an analysis of the Federal Government's role in the economy and an explanation of the Federal budget, it's important to remember that the source of the US government's revenue--as with most governments--comes from its power to impose taxation on the people and then enforce the collection of it.

Of course, each country in the world has developed various forms of direct and indirect taxation. In the USA most of the revenue generated to fund the Federal Government comes from five major sources: Corporate income tax, individual income tax, employment taxes, estate and gift taxes, and excise taxes. On the facing page you'll see how these five categories break out from 2002-2006. As you can see the Federal Government took in a total of $2.5 trillion in taxes in 2006. Since the GDP of America in 2006 was $13.2 trillion, tax receipts equaled 18.9% of GDP--let's say 19% to make it easy. In other words, for each $1 trillion of GDP growth, the government receives $190 billion in new tax receipts.

But how much the government receives, especially from individuals, isn't nearly as interesting as who pays it, particularly since there are common assumptions in public opinion and the presidential campaign about this issue. On the next three pages you will see who paid the $935 billion in individual income taxes based on the IRS income bands. (The IRS provides all of these income bands and more information on their website as a matter of public record; www.irs.gov).

There were about 90 million returns filed in 2006 (no break-out is provided as to how many were single and how many joint), which showed total taxable income of roughly $5 trillion. Of this taxable income, $935 billion, or 18.7%, was paid in taxes. As we all know, the tax burden is not the same for all. But who paid the taxes might surprise you.

This chapter also includes a brief but interesting history of taxation in America under different administration and compare and contrasts them to the function of the US economy.

(...more in the book)