Revenue Drivers as Percent of Total Revenue: Average Federal Revenue
Are Skewed to Social Insurance (Entitlement) Taxes and Away from Corporate Income Taxes
1965 — 2005 USA Real Federal Income Mix by Category
Share of Total Revenue
40-yr ‘05 vs 40-yr 1965 2005 Average Variance Individual Income Taxes 42% 43% 46% -3% Corporate Income Taxes 22 13 12 1 Social Insurance Taxes 19 37 33 4 Other Taxes & Fees 17 7 10 -3 Total Federal Revenue 100% 100% 100% 0% “Normal” Note: All data are inflation adjusted using GDP price index from BEA; ’05 vs. 40-yr variance is rounded. KP Data source: White House Office of Management & Budget. (@)E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 227
Revenue Drivers as Percent of Revenue:
Observations from Previous Slide
Social Insurance taxes (for entitlement programs) have risen materially to 37% of revenue (vs. 33% 40-year average), and have risen aggressively from 19% in 1965, owing to introduction of Medicare in 1965 and the 1983 reform of social security taxes.
Questions:
1) What level of social insurance / entitlement ‘tax’ can USA Inc. support on an on-going basis? Rising from 19% of revenue in 1965 to 33% of revenue in 2005 — of which 75% was spent on healthcare — takes its toll on other areas of spending / growth. There are serious tradeoffs - every dollar that goes to entitlement programs is not spent on education, infrastructure, and defense.
2) Why have corporate income taxes fallen to 13% of revenue in 2009 from 22% in 1965 aside from recession? How crucial has this been to maintain global competitive advantage and stimulating American job and GDP growth?
Note: All data are inflation adjusted using GDP price index from BEA; 05 vs. 40-yr variance is rounded.
KP Data source: White House Office of Management & Budget. (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 228
HOUSE_OVERSIGHT_020955