1. Copyright ©2003, South-Western College Publishing Contemporary Economics: An Applications Approach By Robert J. Carbaugh 2nd Edition Chapter 9: The Mixed Economy of the United States

2. Carbaugh, Chap. 9 2 Functional distribution of income, 2000 The Mixed Economy: Households Source: Federal Reserve Bulletin, June 2001

3. Carbaugh, Chap. 9 3 Personal distribution of income The Mixed Economy: Households LowestSecondMiddleFourthTop Year20 percent20 percent20 percent20 percent20 percent 1935-64.1%9.2%14.1%20.9%51.7% 19504.512.017.423.442.7 19604.812.217.824.041.3 19705.412.217.623.840.9 19805.211.517.524.341.5 19854.710.916.824.143.5 19904.610.816.623.844.3 19993.68.914.923.249.4 Money income before taxes Source: US Dept. of Commerce, Bureau of the Census

4. Carbaugh, Chap. 9 4 Households as spenders and savers, 1999 The Mixed Economy: Households AmountPercent (billions) of total Disposition of household income Personal consumption expenditures$6,26983% Personal taxes1,15215 Personal savings1482 7,569100 Composition of personal consumption Expenditures Durable goods$76212% Non-durable goods1,85430 Services3,66258 6,269100 Source: Economic Report of the President, 2001

5. Carbaugh, Chap. 9 5 US business firms in 1998 The Mixed Economy: Business Number ofBusiness firms (mill.)receipts (bill.) Form of businessNumberpercentDollarspercent Proprietorships16.972%$8435% Partnerships1.77%1,0426% Corporations4.821%14,89089% TOTAL23.4100%16,775100% Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

6. Carbaugh, Chap. 9 6 Growth of total government outlays, 1960-2000 The Mixed Economy: Government Source: Economic Report of the President, various issues

7. Carbaugh, Chap. 9 7 Personal income taxes 50% Corporate income taxes 10% Excise, Customs, Estate, Gift and misc. taxes 8% Social Security, Medicare & other retirement taxes 32% Federal Receipts Federal government expenditures and receipts, 2000 Government Finance Social security, Medicare, & other retirement 48% National defense 16% Net interest on the debt 13% Other 13% Health 9% International affairs 1% Federal Expenditures Source: Economic Report of the President, 2001

8. Carbaugh, Chap. 9 8 Education 33% Highways 7% Other 44% Expenditures State and local receipts and expenditures, 1998 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 16% Source: Economic Report of the President, 2001

9. Carbaugh, Chap. 9 9 Taxes and tax rates Taxation NationAverage tax rate Sweden63.0% France50.9 Italy46.8 Germany44.8 Canada43.4 United Kingdom40.6 United States34.4 Japan30.8 Singapore28.1 Hong Kong16.1 Total tax receipts as a percent of domestic output, 1999 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

10. Carbaugh, Chap. 9 10 Progressive, proportional & regressive taxes Taxation TotalTotalAverageMarginal incometaxes duetax ratetax rate Progressive tax $0$0-- 10055%5% 2002010%15% 3004515%25% Regressive tax $0$0-- 1003030%30% 2005025%20% 3006020%10% Proportional tax $0$0-- 1001010%10% 2002010%10% 3003010%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.

11. Carbaugh, Chap. 9 11 Federal income tax rates for a single taxpayer, 2000 Taxation Tax bracketTaxesAverageMarginal OverUp todue*tax ratetax rate $026,250$3,93815%15% 26,25063,55014,38223%28% 63,550132,60035,78727%31% 132,600288,35091,85732%36% 288,350and over39.6% * Computed at the top of the four lowest taxable Income brackets. Source: Internal Revenue Service, 2000 Tax Rate Schedules

12. Carbaugh, Chap. 9 12 Share of federal personal income tax paid by various income groups, 2000 Taxation Percentiles rankedAdjusted gross incomePercentage of federal adjusted gross incomethreshold on percentilespersonal income tax paid Top 1%$269,49635% Top 5%114,72954 Top 10%83,22065 Top 25%50,60783 Top 50%25,49196 Bottom 50%less than 25,4914 Source: US Congress, Joint Economic Committee, October 2000

13. Carbaugh, Chap. 9 13 Size of government in selected nations, 1999 Taxation Government expenditures as a percentage Nationof domestic output Sweden60.8% Denmark55.1 France54.3 Netherlands47.2 Germany46.9 Canada42.1 United Kingdom40.2 Japan36.9 Australia32.9 United States32.8 South Korea19.4 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 2000

14. Carbaugh, Chap. 9 14 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

15. Carbaugh, Chap. 9 15 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, 2000