Copyright ©2001, South-Western College Publishing Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition Chapter 9: The Mixed Economy of the United States

Carbaugh, Chap. 9 2 Functional distribution of income, 1998 The Mixed Economy: Households Source: Federal Reserve Bulletin, April 1999

Carbaugh, Chap. 9 3 Personal distribution of income The Mixed Economy: Households LowestSecondMiddleFourthTop Year20 percent20 percent20 percent20 percent20 percent %9.2%14.1%20.9%51.7% Money income before taxes Source: US Dept. of Commerce, Bureau of the Census, Current Population Reports

Carbaugh, Chap. 9 4 Households as spenders and savers, 1997 The Mixed Economy: Households AmountPercent (billions) of total Disposition of household income Personal consumption expenditures$5,67484% Personal taxes98914 Personal savings1212 6, Composition of personal consumption Expenditures Durable goods$67312% Non-durable goods1,60128 Services3, , Source: Economic Report of the President, 1999

Carbaugh, Chap. 9 5 US business firms in 1995 The Mixed Economy: Business Number ofBusiness firms (mill.)receipts (bill.) Form of businessNumberpercentDollarspercent Proprietorships16.473%$8075% Partnerships1.67%8546% Corporations4.520%13,96989% TOTAL %15,630100% Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998

Carbaugh, Chap. 9 6 Growth of total government outlays, The Mixed Economy: Government Source: Economic Report of the President, 1999

Carbaugh, Chap. 9 7 Personal income taxes 46% Corporate income taxes 11% Excise, Customs, Estate, Gift and misc. taxes 8% Social Security, Medicare, Unemployment & other retirement taxes 34% Borrowing to cover deficit 1% Federal Receipts Federal government outlays and receipts, 1998 Government Finance Social security, Medicare, & other retirement 38% National defense, Veterans, & Foreign affairs 20% Net interest on the debt 15% Social programs 18% Physical, Human & Community Development 7% Law enforcement & General government 2% Federal Outlays Source: Economic Report of the President, 1999

Carbaugh, Chap. 9 8 Education 33% Highways 6% Other 43% Expenditures State and local receipts and expenditures, 1996 Government Finance Sales and Excise taxes 20% Other 29% Property tax 17% Revenue from the Federal Government 19% Corporate income tax 3% Receipts Individual income tax 12% Public welfare 18% Source: Economic Report of the President, 1999

Carbaugh, Chap. 9 9 Taxes and tax rates Taxation NationAverage tax rate Sweden55.6% France47.6 Italy44.8 Germany44.1 Canada37.2 United Kingdom35.5 United States31.7 Japan29.0 Singapore28.1 Hong Kong16.1 Total tax receipts as a percent of domestic output, 1996

Carbaugh, Chap Progressive, proportional & regressive taxes Taxation TotalTotalAverageMarginal incometaxes duetax ratetax rate Progressive tax $0$ %5% %15% %25% Regressive tax $0$ %30% %20% %10% Proportional tax $0$ %10% %10% %10% * In a progressive tax system, the average tax rate and marginal tax rate rise as income increases. * In a regressive tax system, the average tax rate and marginal tax rate fall as income increases. * In a proportional tax system, the average tax rate and marginal tax rate remain the same as income increases.

Carbaugh, Chap Federal income tax rates for a single taxpayer, 1998 Taxation Tax bracketTaxesAverageMarginal OverUp todue*tax ratetax rate $025,350$3,80315%15% 25,35061,40013,89623%28% 61,400128,10034,56327%31% 128,100278,45088,66932%36% 278,450and over39.6% * Computed at the top of the four lowest taxable Income brackets.

Carbaugh, Chap Size of government in selected nations, 1996 Taxation Government expenditures as a percentage Nationof domestic output Sweden64.7% Denmark61.5 Finland57.4 France54.5 Belgium54.3 Netherlands49.9 Germany49.0 Canada44.7 United Kingdom41.9 Australia36.6 Japan32.0 United States31.4 South Korea19.3 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998

Carbaugh, Chap Progressive vs. flat-rate income tax Taxation 23,35056,550117,950256,500 15% 28% 31% 36% 39.6% 20% Progressive tax Flat-rate tax Tax rate

Carbaugh, Chap Taxes on goods & services as a share of total tax revenue Taxation Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998