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I am graphing the average combined federal taxes on our single earner family of four with three combinations of tax rates: 

  • Income only

  • Income & Payroll (the employee part of social security and medicare)

  • Income & Payroll (both the employer and employee part of social security and medicare)

For comparison, you can see how the top marginal individual income taxes  rates for the highest earners dropped since the 1950s while the social insurance taxes (i.e. the payroll marginal tax rates) increased. 

Keep in mind the Tax Policy Center calculate these rates for:

  •  4 person family including a married couple with one earner

  •  Itemized deductions are assumed to equal 23 percent of income through 1986 and 18 percent of income thereafter

Data: Historical Combined Income and Employee Tax Rates for a Family of Four; Historical Social Security and FICA Tax Rates for a Family of Four 

 

If you wish to support this project on US taxes and get a first look at the graphs as I make them, make a monthly pledge on Patreon.

     
 
 
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My last set of graphs shows the decline of C corporations since the 1980s while the share of pass-through businesses increased. Pass-through businesses do not pay taxes through the corporate tax code but through individual tax code. Here are the three main sources of federal revenue (% of GDP) and you can see how corporate income tax receipts were greater in the decades between 1940-1980 but with very little change in the individual income tax receipts.

Data is from the Office of Management and Budget, Historical Tables, Table 2.3

     
 
 
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Share of returns filed by C corporations has dropped 16.6% to 4.9% 1980-2012 with sole proprietorships filing the majority of business returns. At the same time, the net income reported by C corporations has dropped since 1980 from 68.0% to 37.1% in 2012.

A simple matrix of business structures and Pass-Through Businesses: Data and Policy provide more information but one thing you need to know is:

The majority of companies in the United States are pass-through businesses. These businesses are not subject to the corporate income tax; instead, their income is reported on their owners’ tax returns and subject to the individual income tax.

Data Source: IRS https://www.irs.gov/uac/soi-tax-stats-integrated-business-data Table 1: Selected financial data on businesses. 

     
 
 
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