Page 22011Budget Chart Book         The Federal Budget in Pictures
The Entitlements Initiative is one of 10 Transformational Initiatives making up The HeritageFoundation’s Leadership for Am...
2011 Budget Chart Book                     The Federal Budget in Pictures       The Thomas A. Roe Institute for Economic P...
Page                                  About the Budget Chart Book                                                         ...
Table of Contents                                                                                       v	PageFEDERAL SPEN...
DEBT AND DEFICITSvi     	 National Debt Set to Skyrocket.....................................................................
ndatory Spending Has Increased Five Times Fasteran Discretionary Spendingone-third of the federal budget, discretionary sp...
Page 2     Federal Spending per Household Is Skyrocketing       The federal government is spending more per household than...
Page 3     Federal Spending Is Growing Faster Than Federal Revenue       Since 1965, spending has risen constantly. Federa...
Page 4     Federal Spending Grew More Than Ten Times Faster       Than Median Income       When federal spending grows fas...
Page 5     Federal Spending Is Outpacing Inflation       Prices of goods and services normally rise year to year, but fede...
Page 6     Total Government Spending Has More Than Doubled Since 1965       State and local government spending per househ...
Page 7     Mandatory Spending Has Increased Five Times Faster       Than Discretionary Spending       Only one-third of th...
Page 8     Defense Spending Has Declined While Entitlement       Spending Has Increased       Spending on national defense...
Page 9     Obama’s Budget Would Reduce National Defense Spending       Adequate funding for the core defense program is cr...
Page 10    More Than Half of the President’s Budget       Would Be Spent on Entitlement Programs       In combination with...
Page 11    Total Welfare Spending Is Rising Despite Attempts at Reform       Total means-tested welfare spending (cash, fo...
Page 12    Runaway Spending, Not Inadequate Tax Revenue,       Is Responsible for Future Deficits       The main driver be...
Federal Revenues by SourceThe Top 10 Percent of Earners Paid 70 Percentof Federal Income Taxes                 Most federa...
Page 14    Taxes per Household Have Risen Dramatically       Though the economic downturn has temporarily lowered overall ...
Page 15    The Top 10 Percent of Earners Paid 70 Percent       of Federal Income Taxes       Top earners are the target fo...
Page 16    Federal Revenues Have More Than Tripled Since 1965       Overall tax revenues have risen despite a recent decli...
Page 17    Federal Revenues by Source       Most federal revenues come from individuals. Personal income taxes provide the...
Page 18    Tax Receipts Return to Historical Average       The overall tax burden on Americans is measured as a share of g...
Page 19    Increasing Tax Rates Does Not Necessarily Lead       to Higher Income Tax Receipts       Tax cuts can create in...
Page 20    U.S. Corporate Tax Rate Is Uncompetitive       High U.S. federal and state corporate tax rates make it difficult...
Page 21    Total Tax Burden Is Rising to Highest Level in History       Taxes are projected to increase rapidly under vari...
t Spending Will More Than Triple Over the Next Decade grows, interest payments will consume more and more of the federal b...
Page 24    National Debt Set to Skyrocket       In the past, wars and the Great Depression contributed to rapid but tempor...
Page 25       Each American’s Share of National Debt Is Growing       As Washington continues to spend more than it can af...
Page 26    Obama’s Budget Would Send Federal Debt to Levels       Not Seen Since World War II       In 2008, publicly held...
Page 27    Obama’s Budget Worsens Debt Problem,       but The Heritage Plan Solves It       Spending in the President’s bu...
Page 28    Obama’s Budget Would Deepen Already Unprecedented Deficits       The President is responsible for submitting an...
Page 29    Federal Budget Deficits Will Reach Levels       Never Seen Before in the U.S.       Recent budget deficits have ...
Page 30    Rising Deficits Drive U.S. Debt Limit Higher, Faster       Congress first placed a statutory limit on total fede...
Page 31    U.S. Debt on Track to Fuel Economic Crisis       Countries like Greece and Portugal have suffered or are antici...
Page 32    Net Interest Spending Will More Than Triple Over the Next Decade       As the national debt grows, interest pay...
Page 33    In One Year, Spending on Interest on the National Debt       Is Greater Than Funding for Most Programs       In...
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
2011 Budget Chart Book
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2011 Budget Chart Book

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The Heritage Foundation’s Budget Chart Book is a user-friendly way to learn about the federal budget in pictures.

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2011 Budget Chart Book

  1. 1. Page 22011Budget Chart Book The Federal Budget in Pictures
  2. 2. The Entitlements Initiative is one of 10 Transformational Initiatives making up The HeritageFoundation’s Leadership for America campaign. For more products and information related to thisinitiative or to learn more about the Leadership for America campaign, please visit heritage.org. The Heritage Foundation is a research and educational institution—a think tank—whose mission isto formulate and promote conservative public policies based on the principles of free enterprise, limitedgovernment, individual freedom, traditional American values, and a strong national defense. Our vision is to build an America where freedom, opportunity, prosperity, and civil society flourish. Asconservatives, we believe the values and ideas that motivated our Founding Fathers are worth conserving.As policy entrepreneurs, we believe the most effective solutions are consistent with those ideas and values.
  3. 3. 2011 Budget Chart Book The Federal Budget in Pictures The Thomas A. Roe Institute for Economic Policy Studies214 Massachusetts Avenue, NE • Washington, D.C. 20002 • (202) 546-4400 • heritage.org Copyright © 2011 The Heritage Foundation
  4. 4. Page About the Budget Chart Book iii iii The federal budget is on an unsustainable course, cuts and serious entitlement reforms, debt will ap- with even more runaway spending and rising debt on proach dangerous levels and further strain the econo- the horizon. Now, more than ever, it is important for my. As emphasized on page 29, Federal Budget Deficits Americans to understand what our nation’s spending, Will Reach Levels Never Seen Before in the U.S., and page taxes, and debt mean to them. The Heritage Foun- 31, U.S. Debt on Track to Fuel Economic Crisis. dation’s Budget Chart Book is a user-friendly way to America is poised on a precipice of disastrous defi- learn about the federal budget through pictures. cits due primarily to spending on the three major en- Federal spending was on the rise prior to the eco- titlement programs—Social Security, Medicare, and nomic recession and passage of the 2009 stimulus Medicaid. Entitlement spending is growing and bold bill, and it continues to climb steeply under President reforms are necessary to fix this massive problem. As Obama. As illustrated on page 2, Federal Spending shown on page 37, Entitlement Spending Will More per Household Is Skyrocketing, and on page 3, Federal Than Double by 2050, and on page 48, The Heritage Spending Is Growing Faster Than Federal Revenue. Plan Keeps Spending Low and Ends Deficits Without Rais- Some policymakers would pay for increased spend- ing Taxes. ing with tax hikes. However, taxes have already risen to Tough policy choices and strong entitlement re- burdensome levels and will reach unprecedented heights. forms are essential to get the federal budget back As explained on page 15, The Top 10 Percent of Earners on track. The Budget Chart Book will help you un- Paid 70 Percent of Federal Income Taxes, and on page 21, derstand the current fiscal situation, and it will help Total Tax Burden Is Rising to Highest Level in History. Americans to appreciate the magnitude of the deci- Record deficits will be the norm as spending con- sions that policymakers must enact to protect Ameri- tinues to grow faster than revenue. Absent spending ca’s fiscal future.
  5. 5. Table of Contents v PageFEDERAL SPENDING Federal Spending per Household Is Skyrocketing..................................................................................................2 Federal Spending Is Growing Faster Than Federal Revenue..................................................................................3 Federal Spending Grew More Than Ten Times Faster Than Median Income.........................................................4 Federal Spending Is Outpacing Inflation................................................................................................................5 Total Government Spending Has More Than Doubled Since 1965........................................................................6 Mandatory Spending Has Increased Five Times Faster Than Discretionary Spending...........................................7 Defense Spending Has Declined While Entitlement Spending Has Increased........................................................8 Obama’s Budget Would Reduce National Defense Spending..................................................................................9 More Than Half of the President’s Budget Would Be Spent on Entitlement Programs..........................................10 Total Welfare Spending Is Rising Despite Attempts at Reform..............................................................................11 Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits.........................................12FEDERAL REVENUE Taxes per Household Have Risen Dramatically.....................................................................................................14 The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes............................................................15 Federal Revenues Have More Than Tripled Since 1965.......................................................................................16 Federal Revenues by Source.................................................................................................................................17 Tax Receipts Return to Historical Average............................................................................................................18 Increasing Tax Rates Does Not Necessarily Lead to Higher Income Tax Receipts.................................................19 U.S. Corporate Tax Rate Is Uncompetitive...........................................................................................................20 Total Tax Burden Is Rising to Highest Level in History.........................................................................................21
  6. 6. DEBT AND DEFICITSvi National Debt Set to Skyrocket.............................................................................................................................24 Each American’s Share of National Debt Is Growing............................................................................................25 Obama’s Budget Would Send Federal Debt to Levels Not Seen Since World War II.............................................26 Obama’s Budget Worsens Debt Problem, but The Heritage Plan Solves It............................................................27 Obama’s Budget Would Deepen Already Unprecedented Deficits........................................................................28 Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S.............................................................29 Rising Deficits Drive U.S. Debt Limit Higher, Faster............................................................................................30 U.S. Debt on Track to Fuel Economic Crisis.........................................................................................................31 Net Interest Spending Will More Than Triple Over the Next Decade...................................................................32 In One Year, Spending on Interest on the National Debt Is Greater Than Funding for Most Programs...............33 ENTITLEMENTS Entitlements Will Consume All Tax Revenues by 2049........................................................................................36 Entitlement Spending Will More Than Double by 2050......................................................................................37 Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending......................................38 Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056...............39 Letting Tax Cuts Expire Will Not Balance the Budget...........................................................................................40 Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates...........................................................41 Taxing the Wealthy to Cover Future Deficits Won’t Work....................................................................................42 Balancing the Budget Without Cutting Spending Would Cause Taxes to Skyrocket ...........................................43 Discretionary Spending Cuts Alone Are Not an Adequate Substitute for Entitlement Reform.............................44 Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem.....45 The Alternative: Saving the American Dream.......................................................................................................46 The Heritage Plan Would Reverse Trajectory of Unsustainable Debt....................................................................47 The Heritage Plan Keeps Spending Low and Ends Deficits Without Raising Taxes..............................................48
  7. 7. ndatory Spending Has Increased Five Times Fasteran Discretionary Spendingone-third of the federal budget, discretionary spending, is subject to annual budgets. The remainder,atory spending, is set on autopilot without congressional debate and has increased more than five times fasterdiscretionary spending. Most of the current increase is due to entitlement spending. Runaway Spending, Not Inadequate Tax Revenue,ATION-ADJUSTED TRILLIONS OFfor Future Deficitsrlon ii l t Is Responsible DOLLARS (2010) Federal Spending More Than Half of the Presidents Budget The main driver behind long-term deficits is government spending—not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending Programs Would Be Spent on Entitlement $3. t ilon 6 rli will shoot past its historical average of 20.3 combination with other entitlements, Medicare, Medicaid, and Social Security constitute the lion’s share In percent, reaching 26.4 percent in the same year.rlon ii t l Spending has risen to unprecedented levels, threatening limited of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent. PERCENTAGE OF GDPrlon ii l t 30% government and economic freedom. PERCENTAGE OF THE PRESIDENT’S FY2012 BUDGET Entitlement Programs: 58% trlon ii l 26.4% Social M edi 24. car 7% I e ncom e Securtiy N atonal i N et Al O t l her 25% Securt iy: and M edi d: cai and O ther D ef e: ens I er t Spendi nt es : ng:rlon ii t l Spending 20% 20% Enttem ent : il s 18% 19% 6% 12% Av agesf er or 1960–2009:rlon ii t l $609 bii n $609 bilon 609 lo 20% Manda ory Mandatory Mandatory anda andatory at a 20.3% Spendi ng 18. 4% Spending Spending Spending drlon ii t l 18.0% Revenue Revenuerlon ii t l 15% Discretionary Discreti nar Discretionary reti io i 14. 8% Spending $0 Pr ec ed oj t 1965 10% 1970 1975 1980 1985 1990 1995 2000 50% 2005 2010 1960 1970 1980 N ot 1990 have been2000 e:Fi es gur rounded. 2010 2021 2011 fgur ar esFor gn Ai Educaton: i es e tm at d: i eies i 2% 3%e: hie H ous Source:H eriage Foundatent and Budget on C ongressie H ouse O fi fi M dat entand Budget. W t e O fi ofM anagem i cal atons based Source:W hionalBudgetce fce anagem fce t on cul i . t O f of a. Per age ofGD P cent FederalSpendi C hart 7 • 2011 BudgetC hartBook ng hert or iage. gar ( s 2010) FederalSpendi C hart 4 • 2011 Budget t Book hart 6 •2011 .or C hartBook ng FederalSpendi C heritage Char ng Budget hert or iage. g runaway-pendi t r s ng-ax-evenue Per age oft Pr i sFY2012 Budget cent he esdent budgetenttem entpr am s - il - ogr g
  8. 8. Page 2 Federal Spending per Household Is Skyrocketing The federal government is spending more per household than ever before. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase. INFLATION-ADJUSTED DOLLARS (2010) $40,000 $29,401 $35,773 $35,000 $30,000 $25,000 $20,000 $11,431 $15,000 $10,000 $5,000 Actual Projected $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: U.S. Census Bureau, White House Office of Management and Budget, and Congressional Budget Office. Inflation-Adjusted Dollars (2010) federal-spending-per-household Federal Spending Chart 1 • 2011 Budget Chart Book heritage.org
  9. 9. Page 3 Federal Spending Is Growing Faster Than Federal Revenue Since 1965, spending has risen constantly. Federal revenues have dropped recently due to the economic recession, but spending has reached a record high. INFLATION-ADJUSTED TRILLIONS OF DOLLARS (2010) $4 trillion $3.77 trillion Spending Est. 2011 $3 trillion deficit: $1.62 trillion $2 trillion $2.15 trillion Revenue $1 trillion 2011 figures are $0 estimates 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: White House Office of Management and Budget. Inflation-Adjusted Billions of Dollars (2010) growth-federal-spending-revenue Federal Spending Chart 2 • 2011 Budget Chart Book heritage.org
  10. 10. Page 4 Federal Spending Grew More Than Ten Times Faster Than Median Income When federal spending grows faster than Americans’ paychecks, the burden on taxpayers becomes greater. Over the past few decades, middle-income Americans’ earnings have risen only 27 percent, while spending has increased 299 percent. PERCENT CHANGE OF INFLATION-ADJUSTED DOLLARS (2010) 300% 1970 $890 billion 2009 $3,551 billion 250% +299% 200% Total Federal 150% Spending 1970 $39,732 100% 2009 $50,255 Median +27% 50% Household Income 0% 1970 1975 1980 1985 1990 1995 2000 2005 2009 Source: U.S. Census Bureau and White House Office of Management and Budget. Percent Change of Inflation-Adjusted Dollars (2010) growth-federal-spending Federal Spending Chart 3 • 2011 Budget Chart Book heritage.org
  11. 11. Page 5 Federal Spending Is Outpacing Inflation Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending. +17.9% YEAR-TO-YEAR PERCENTAGE CHANGE Federal Spending 15% Inflation Average Change in Average 10% Federal Change in +9.3% Spending: Inflation: +7.9% +7.8% +7.4% +7.4% +5.3% +2.5% +6.2% 5% 2010 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 –1.7% Source: U.S. Bureau of Labor Statistics and White House Office of Management and Budget. Year-to-Year Percentage Change federal-spending-inflation Federal Spending Chart 4 • 2011 Budget Chart Book heritage.org
  12. 12. Page 6 Total Government Spending Has More Than Doubled Since 1965 State and local government spending per household imposes a significant, and growing, burden on taxpayers on top of federal spending. In 1970, median household income was $17,839 greater than total government spending per household, compared to only $2,431 in 2009. PER-HOUSEHOLD SPENDING, IN INFLATION-ADJUSTED DOLLARS (2010) 2009 $50,000 Median household income: $50,255 1965 Per-household spending: $47,824 Median household income: $40,000 $39,732 $30,000 Per-household spending: $21,893 State and Local Spending $20,000 Federal $10,000 Spending $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: U.S. Census Bureau, White House Office of Management and Budget, and 2011 Economic Repor t of the President. Per-Household Spending, In Inflation-Adjusted Dollars (2010) total-government-spending Federal Spending Chart 5 • 2011 Budget Chart Book heritage.org
  13. 13. Page 7 Mandatory Spending Has Increased Five Times Faster Than Discretionary Spending Only one-third of the federal budget, discretionary spending, is subject to annual budgets. The remainder, mandatory spending, is set on autopilot without congressional debate and has increased more than five times faster than discretionary spending. Most of the current increase is due to entitlement spending. INFLATION-ADJUSTED TRILLIONS OF DOLLARS (2010) $4.0 trillion $3.6 trillion $3.5 trillion $3.0 trillion $2.5 trillion $2.0 trillion $1.5 trillion $609 billion Mandatory $1.0 trillion Spending $0.5 trillion Discretionary Spending $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 figures are estimates Source: White House Office of Management and Budget. Inflation-Adjusted Billions of Dollars (2010) mandatory-discretionary-spending Federal Spending Chart 6 • 2011 Budget Chart Book heritage.org
  14. 14. Page 8 Defense Spending Has Declined While Entitlement Spending Has Increased Spending on national defense, a core constitutional function of government, has declined significantly over time, despite wars in Iraq and Afghanistan. Spending on the three major entitlements—Social Security, Medicare, and Medicaid—has more than tripled. PERCENTAGE OF GDP 10% 1976 was Entitlements the first year (Social Security, entitlement Medicare, Medicaid) 8% spending 10% exceeded defense spending 6% 7.4% National Defense 4% 2.5% 5% 2% 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 figures are estimates Source: White House Office of Management and Budget. Percentage of GDP defense-entitlement-spending Federal Spending Chart 7 • 2011 Budget Chart Book heritage.org
  15. 15. Page 9 Obama’s Budget Would Reduce National Defense Spending Adequate funding for the core defense program is crucial for the military to fulfill its constitutional duty to provide for the common defense. Yet defense spending has fallen below its 45-year historical average despite ongoing operations in Iraq and Afghanistan. DEFENSE SPENDING AS A PERCENTAGE OF GDP 10% 9.5% 8% 6.2% 5.0% 3.4% 6% 45-Year Average: 5.2% 4% 2% Actual Projected 0% 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: White House Office of Management and Budget. Defense Spending as a Percentage of GDP national-defense-spending Federal Spending Chart 8 • 2011 Budget Chart Book heritage.org
  16. 16. Page 10 More Than Half of the President’s Budget Would Be Spent on Entitlement Programs In combination with other entitlements, such as food stamps, unemployment, and housing assistance, Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent. PERCENTAGE OF THE PRESIDENT’S FY2012 BUDGET Entitlement Programs: 58% Social Medicare Income Security National Net All Other Security: and Medicaid: and Other Defense: Interest: Spending: 20% 20% Entitlements: 18% 19% 6% 12% 50% Foreign Aid: Education: Note: Figures have been rounded. 2% 3% Source: White House Office of Management and Budget. Percentage of the Presidents FY2012 Budget budget-entitlement-programs Federal Spending Chart 9 • 2011 Budget Chart Book heritage.org
  17. 17. Page 11 Total Welfare Spending Is Rising Despite Attempts at Reform Total means-tested welfare spending (cash, food, housing, medical care, and social services for the poor) has increased 17-fold since the beginning of Lyndon Johnson’s War on Poverty in 1964. Though the current trend is unsustainable, the Obama Administration plans to increase future welfare spending rather than enact true policy reforms. WELFARE SPENDING IN INFLATION-ADJUSTED DOLLARS (2010) $890 billion $900 billion 1996 $800 billion Reform “ends $700 billion 1981 welfare” Reagan $600 billion “slashes” $500 billion welfare 1964 $400 billion War on Poverty $300 billion begins $200 billion $100 billion $0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Heritage Foundation calculations based on data from current and previous White House Office of Management and Budget documents and other official government sources. Spending in Billions of Dollars (2010) welfare-spending Federal Spending Chart 10 • 2011 Budget Chart Book heritage.org
  18. 18. Page 12 Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits The main driver behind long-term deficits is government spending—not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending will shoot past its historical average of 20.3 percent, reaching 26.4 percent in the same year. PERCENTAGE OF GDP 30% 26.4% 24.7% 25% Spending Averages for 1960–2009: 20% 20.3% Spending 18.4% 18.0% Revenue 15% Revenue 14.8% Projected 10% 1960 1970 1980 1990 2000 2010 2021 Source: Heritage Foundation calculations based on Congressional Budget Office data. Percentage of GDP runaway-spending-tax-revenue Federal Spending Chart 11 • 2011 Budget Chart Book heritage.org
  19. 19. Federal Revenues by SourceThe Top 10 Percent of Earners Paid 70 Percentof Federal Income Taxes Most federal revenues come from individuals. Personal incomeTop earners are the target for new tax increases, but the U.S. tax system revenues, though sometop is already highly progressive. The of this is small-business income. Social1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percentpaid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all. source. second-largestPERCENTAGE OF FEDERAL INCOME TAXES (2008) Federal Revenue Bottom PERCENTAGE OF TOTAL FEDERAL REVENUE (2010) 50% U.S. Corporate Tax Rate Uncompetitive Individual The tax U.S. federal and state corporate tax rates make it difficult for businesses to compete internationally. record levels High burden in America is climbing and will reach Pay consistently higher than the average of industrialized policy changes. without nations. 26%–50%$898. bii ( 5 lon) l ($8 While other countries are reducing corporate tax rates, the U.S. has maintained rates significantly and Thi L v s e el COMBINED CORPORATE TAX RATES 40% 11%–25% ofI om e nc Top 1% 2%–5% 6%–10% Ear s. ner .. United States: 39% . P dThi . ai s . 38% 35% 21% 11% 16% 11% 3% Pr ton of opori t F al he eder 32. 9% 31. 9% 30. 7% 30. 2% OECD Average 41.6% 4 I om eT nc ax 30% 29. 3% i 2008. n 28. 2% 27. 6% 27. 2% 26. 2% 26. 0% 26. 0% Cor at por e 25%Sour Tax Foundaton and I er Revenue Servi ce: i nt nal 2000 ce. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sour e: r s i f Econom i C o- c O ganiaton or c oper i and D evel aton opm ent.Per age ofFeder I cent alncom eTaxes(2008) FederalRevenue C hart 2 • 2011 BudgetC hartBook hert or iage. g Cus om sD utes M ic t i , stop10- centi per -ncom e- ner ear s Com bi Cor at Tax Rat ( ned por e cor at t r e por e-ax-at es 2000- 2010) FederalRevenue C hart 5 • 2011 Budget t Book Char heritage .or Excie s Es at and G i t e f
  20. 20. Page 14 Taxes per Household Have Risen Dramatically Though the economic downturn has temporarily lowered overall tax revenues, the tax burden on Americans is still high. INFLATION-ADJUSTED DOLLARS (2010) $25,000 $24,147 $18,400 $20,000 $17,959 $11,295 Current levels higher than 1994 $15,000 $10,000 $5,000 $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: U.S. Census Bureau and White House Office of Management and Budget. Inflation-Adjusted Dollars (2010) taxes-per-household Federal Revenue Chart 1 • 2011 Budget Chart Book heritage.org
  21. 21. Page 15 The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all. PERCENTAGE OF FEDERAL INCOME TAXES (2008) Bottom 50% 26%–50% This Level 11%–25% of Income Top 1% 2%–5% 6%–10% Earners ... ... Paid This 38% 21% 11% 16% 11% 3% Proportion of the Federal Income Tax in 2008. Source: Tax Foundation and Internal Revenue Service. Percentage of Federal Income Taxes (2008) top10-percent-income-earners Federal Revenue Chart 2 • 2011 Budget Chart Book heritage.org
  22. 22. Page 16 Federal Revenues Have More Than Tripled Since 1965 Overall tax revenues have risen despite a recent decline due to the recession. Congress cut income taxes and the death tax in 2001 and capital gains taxes and dividends in 2003, yet revenues continued to surge even after the tax cuts were passed. INFLATION-ADJUSTED DOLLARS (2010) $3.0 trillion $2.15 trillion $2.5 trillion $2.0 trillion Total Revenue $1.5 trillion $944 billion $1.0 trillion Individual Income Taxes $0.5 trillion $196 billion Corporate Taxes $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: White House Office of Management and Budget. 2011 figure estimated Inflation-Adjusted Billions of Dollars (2010) federal-government-revenues Federal Revenue Chart 3 • 2011 Budget Chart Book heritage.org
  23. 23. Page 17 Federal Revenues by Source Most federal revenues come from individuals. Personal income taxes provide the largest portion of total tax revenues, though some of this is small-business income. Social Security and Medicare payroll taxes are the second-largest source. PERCENTAGE OF TOTAL FEDERAL REVENUE (2010) Individual Payroll Taxes ($898.5 billion) ($864.8 billion) 41.6% 40.0% Corporate: 8.9% ($191.4 billion) Customs Duties, Misc.: 5.6% ($121.2 billion) Excise: 3.1% ($66.9 billion) Estate and Gift: 0.9% ($18.9 billion) Source: Congressional Budget Office. Percentage of Total Federal Revenue (2010) federal-revenue-sources Federal Revenue Chart 4 • 2011 Budget Chart Book heritage.org
  24. 24. Page 18 Tax Receipts Return to Historical Average The overall tax burden on Americans is measured as a share of gross domestic product (GDP). Since World War II, tax receipts have averaged around 18 percent of GDP Receipts have fallen due to the recession, but as the economy . recovers, they will rise above the average level by the end of the decade. TAX RECEIPTS AS A PERCENTAGE OF GDP 24% 20.4% 20.6% 22% 19.3% Tax 20% Revenue 18% 16% 30-Year Average: 18.0% 14% 14.4% 14.9% 12% 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: White House Office of Management and Budget. Tax Receipts as a Percentage of GDP current-tax-receipts Federal Revenue Chart 5 • 2011 Budget Chart Book heritage.org
  25. 25. Page 19 Increasing Tax Rates Does Not Necessarily Lead to Higher Income Tax Receipts Tax cuts can create incentives for individuals to generate more income, which can generate more revenue. The most dramatic decline in the top individual income tax rate, from 70 percent to 28 percent, occurred during the Reagan Administration, during which tax receipts remained relatively constant as a share of the economy. PERCENTAGE OF GDP 100% 91% Top Individual 80% Tax Rate 70% 60% 50% 39.6% 40% 35% Individual 28% Tax Receipts 20% 7.8% as % of GDP 9.4% 7.7% 9.2% 6.3% 0% 1960 1970 1980 1990 2000 2010 2011 figures estimated Source: White House Office of Management and Budget and the Tax Foundation. Percentage of GDP income-tax-receipts Federal Revenue Chart 6 • 2011 Budget Chart Book heritage.org
  26. 26. Page 20 U.S. Corporate Tax Rate Is Uncompetitive High U.S. federal and state corporate tax rates make it difficult for businesses to compete internationally. While other countries are reducing corporate tax rates, the U.S. is virtually tied with Japan for the highest and has maintained rates significantly and consistently higher than the average of industrialized nations. COMBINED CORPORATE TAX RATES 40% United States: 39% 35% 32.9% 31.9% 30.7% OECD 30.2% Average 30% 29.3% 28.2% 27.6% 27.2% 26.2% 26.0% 26.0% 25% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Organisation for Economic Co-operation and Development. Combined Corporate Tax Rates (2000-2010) corporate-tax-rate Federal Revenue Chart 7 • 2011 Budget Chart Book heritage.org
  27. 27. Page 21 Total Tax Burden Is Rising to Highest Level in History Taxes are projected to increase rapidly under various policy scenarios. If the 2001 and 2003 tax cuts expire and more middle-class Americans are required to pay the alternative minimum tax (AMT), taxes will reach unprecedented levels. The tax burden will climb even if those tax breaks are extended. President Obama’s budget, which cuts some taxes and raises others, also increases the overall tax burden. PERCENTAGE OF GDP 28% Tax Cuts Expire 26% Obama’s Budget Highest Tax 24% Burden in U.S. Permanent History: 20.6% Tax Cuts and 22% (2000) Fix AMT 20% 18% 30-Year Historical 16% Tax Burden: (1981–2010): 18% 14% 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 Source: Heritage Foundation calculations based on Congressional Budget Office and White House Office of Management and Budget data. Percentage of GDP total-tax-burden Federal Revenue Chart 8 • 2011 Budget Chart Book heritage.org
  28. 28. t Spending Will More Than Triple Over the Next Decade grows, interest payments will consume more and more of the federal budget.’s budget, the national debt would double and real net interest costs would more Debt and Deficitsnext decade. Rising Deficits Drive U.S. Debt Limit Higher, on Track to Fuel Economic CrisisED DOLLARS (2010) U.S. Debt Faster Congress has raised the amount of federal debt subject to a statutory bilonroughly seventy-eight times $7739 limit $773. ilon $773. bii 9 l since 1940, sometimes multiple times per year. Since 1990, the debtlike Greece and Portugal have suffered or are anticipating financial crises as a result of mounting deb Countries limit has record levels of deficits and debt, Excessive spendingU.S. continuesseen an averagespending on its current trajectory, it will face similar economic woes. has created year-to-year If the increase of 7.8 percent and a total increase of $10.1 trillion. federal deficit and the worst is yet to come. U.S. DEBT LIMIT PROJECTED U.S. PUBLICLY HELD DEBT AS PERCENTAGE OF GDP $15 tr illion 200% $14. t ilon 29 rli Change fom 2009 r2. bilon2. bii n 4 ilo l t 2010: o Change liom 2007 t 2009: 7 f r $188. bilon 150%o +$2.6 trillionPortugal: +$1.9 Italy: Greece: Japan $10 tr n illion 71% trillion 98% 109.6% 178% (ar t l ges annualdol lar 100% i r e) nceas Actual Pr ect oj ed 1997–2002: 95 t ilon $5. rli $5 tr n illion 1995 2000 2005 2010 2015 U.K.:2020 61.3% 1990: 1 t ilon $4. rli 50%fi ofM anagem ent and Budget and C ongr sonalBudget O fil ges perent fce es i f(ar t c age ce. Com par 1946–1953:D ebt and D efi tsnceas •+33%) ci i hart 3 2011 Budget t Book C r e: Char heritage .or ar t o eo $275 bilon li natons i ’ l el of ev s $0 0 0% 1940 1950 1960 1970 19802000 1990 2005 2000 20102010 2015 2020 2025 2030 2035 Sour e: hie H ous O fi ofM anagem ent and Budget c W t e fce . Sour e: r s i f Econom i C o- c O ganiaton or c oper i and D evel aton opm ent and C ongr sonalBudget O fi ( t natve FicalScenaro) es i fce Aler i s i .
  29. 29. Page 24 National Debt Set to Skyrocket In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt. Over the next few decades, runaway spending on Medicare, Medicaid, and Social Security will drive the debt to unsustainable levels. PERCENTAGE OF GDP 350% 344% 300% 250% 200% World War on 150% War II Terrorism 108.6% 100% 100% World The Great War I Depression 50% 0% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: Heritage Foundation calculations based on data from the U.S. Depar tment of the Treasury, Institute for the Measurement of Wor th, Congressional Budget Office, and White House Office of Management and Budget. Percentage of GDP national-debt-skyrocket Debt and Deficits Chart 1 • 2011 Budget Chart Book heritage.org
  30. 30. Page 25 Each American’s Share of National Debt Is Growing As Washington continues to spend more than it can afford, future generations of taxpayers will be on the hook for increasing levels of debt. The amount of debt per citizen will skyrocket. INFLATION-ADJUSTED DOLLARS (2010) $300,000 2050: $279,738 $250,000 2044: $206,771 $200,000 $150,000 2032: $103,827 $100,000 2011: $50,000 1970: $31,871 $6,291 Projected $0 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: U.S. Census Bureau and Congressional Budget Office (Alternative Fiscal Scenario). Inflation Adjusted Dollars (2010) national-debt-burden Debt and Deficits Chart 2 • 2011 Budget Chart Book heritage.org
  31. 31. Page 26 Obama’s Budget Would Send Federal Debt to Levels Not Seen Since World War II In 2008, publicly held debt as a percentage of the economy (GDP) was 40.3 percent, nearly four points below the postwar average. Since then, the debt has increased more than 50 percent, and the President’s FY 2012 budget would more than double it to 87.4 percent by 2021. DEBT AS A PERCENTAGE OF GDP 120% 108.7% 100% 87.4% 80% 60% Average, 1946–2010: 43.8% 40% 20% 40.3% Obama’s Budget 0% 1940 1950 1960 1970 1980 1990 2000 2010 2020 Source: Congressional Budget Office and White House Office of Management and Budget. Debt as a Percentage of GDP obama-budget-debt Debt and Deficits Chart 3 • 2011 Budget Chart Book heritage.org
  32. 32. Page 27 Obama’s Budget Worsens Debt Problem, but The Heritage Plan Solves It Spending in the President’s budget proposal for 2012 would drive the debt to 87 percent of the economy by 2021. In contrast, Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity solves the debt problem through strong budget reforms, lowering debt to 58 percent of GDP in just 10 years. DEBT AS A PERCENTAGE OF GDP 87.4% 90% PRESIDENT OBAMA’S 80% BUDGET 70% 60% HERITAGE Average, 1981–2010: PLAN 50% 40.6% 58.2% 26.1% 40% 30% 20% 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: President’s Budget: Congressional Budget Office and White House Office of Management and Budget; Heritage Plan: Calculations by the Center for Data Analysis based on current projections, data provided by the Peter G. Peterson Foundation, and CDA policy models. Debt as a Percentage of GDP obama-budget-worsens-debt Debt and Deficits Chart 4 • 2011 Budget Chart Book heritage.org
  33. 33. Page 28 Obama’s Budget Would Deepen Already Unprecedented Deficits The President is responsible for submitting an annual budget to Congress and has the authority to veto legislation, including irresponsible spending. Most Administrations have run small but manageable deficits, but President Obama’s unprecedented budget deficits pose serious economic risks. BUDGET DEFICITS AS A PERCENTAGE OF GDP, BY ADMINISTRATION Kennedy Johnson Nixon Ford Carter Reagan Bush Clinton Bush Obama 0% –1% – 0.1% –1.0% – 0.9% –2% –1.6% –3% –2.4% –4% –3.5% –3.2% –5% – 4.3% – 4.3% –6% –7% –8% – 8.3% Source: White House Office of Management and Budget. (est.) Budget Deficits As A Percentage of GDP, By Administration budget-create-deficits Debt and Deficits Chart 5 • 2011 Budget Chart Book heritage.org
  34. 34. Page 29 Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S. Recent budget deficits have reached unprecedented levels, but the future will be much worse. Unless entitlements are reformed, spending on Medicare, Medicaid, and Social Security will drive deficits to unmanageable levels. PERCENTAGE OF GDP 70% 61.5% 60% 50% 40% Average 30% Historical Deficit: 3.0% 20% 9.9% 10% 0% –2.4% –10% 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2084 Source: Congressional Budget Office (Alternative Fiscal Scenario). Percentage of GDP federal-budget-deficits Debt and Deficits Chart 6 • 2011 Budget Chart Book heritage.org
  35. 35. Page 30 Rising Deficits Drive U.S. Debt Limit Higher, Faster Congress first placed a statutory limit on total federal debt in 1917, in the Second Liberty Bond Act. Since 1962, Congress has altered the debt limit through 74 separate measures, raising it 10 times since 2001. Since 1990, the debt limit has been raised a total of $10.1 trillion, but nearly half of that increase has occurred since September 2007. U.S. DEBT LIMIT $15 trillion $14.29 trillion Change from 2009 to 2010: Change from 2007 to 2009: +$2.6 trillion +$1.9 $10 trillion trillion (largest annual dollar increase) 1997–2002: $5.95 trillion $5 trillion 1990: $4.1 trillion (largest percentage 1940: 1946–1953: increase: +33%) $50 billion $275 billion $0 1940 1950 1960 1970 1980 1990 2000 2010 Source: Congressional Research Service and White House Office of Management and Budget (Table 7.3, Historical Tables). Billions of Dollars increases-us-debt-limit Debt and Deficits Chart 7 • 2011 Budget Chart Book heritage.org
  36. 36. Page 31 U.S. Debt on Track to Fuel Economic Crisis Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes. PROJECTED U.S. PUBLICLY HELD DEBT AS PERCENTAGE OF GDP 200% 150% Portugal: Italy: Greece: Japan: 71% 98% 109.6% 178% 100% U.K.: 61.3% 50% Comparisons are to other nations’ 2008 levels of debt. 0% 2000 2005 2010 2015 2020 2025 2030 2035 Source: Organisation for Economic Co-operation and Development and Congressional Budget Office (Alternative Fiscal Scenario). Percentage of GDP us-debt Debt and Deficits Chart 8 • 2011 Budget Chart Book heritage.org
  37. 37. Page 32 Net Interest Spending Will More Than Triple Over the Next Decade As the national debt grows, interest payments will consume more and more of the federal budget, even without interest rate increases. Under the President’s budget, the national debt would double and real net interest costs would more than triple over the next decade. INFLATION-ADJUSTED DOLLARS (2010) $800 billion $773.9 billion $600 billion $400 billion $282.4 billion $188.7 billion $200 billion Actual Projected $0 1990 1995 2000 2005 2010 2015 2020 Source: White House Office of Management and Budget and Congressional Budget Office. Inflation-Adjusted Billions of Dollars (2010) budget-net-interest-spending Debt and Deficits Chart 9 • 2011 Budget Chart Book heritage.org
  38. 38. Page 33 In One Year, Spending on Interest on the National Debt Is Greater Than Funding for Most Programs In 2010, the U.S. spent more on interest on the national debt than it spent on many federal departments, including Education and Veterans Affairs. BILLIONS OF DOLLARS (2010) $800 $666.7 $600 $414.0 $400 $200 $173.1 $129.5 $108.3 $92.9 $0 Department Interest Department Department Department Department of Defense Expense of Labor of of Veterans of Education Agriculture Affairs Source: White House Office of Management and Budget. Billions of Dollars (2010) interest-spending Debt and Deficits Chart 10 • 2011 Budget Chart Book heritage.org
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