Government receipts and expenditures pay for the government. These percentages of economic output are important because the size of the economy determines whether a particular tax burden imposed is manageable. For example, $100B in taxes would crush a $150B economy, but would be much less problematic for a $600B economy.
According to a study conducted by Michael Schuyler, from 1900 to 1912, federal government expenditures were less than 3% of GDP. Budgets were balanced, if not at a surplus, and, up to 1917, most revenue was derived from customs duties and excise taxes.
But, by 1922, federal expenditures hit 24% of GDP and the spending binge that with World War I and continued in the Hoover administration was amplified by FDR. The same is true of taxes. President Hoover increased the top marginal rate from 25% to 63%. Roosevelt raised it to 79%. Then, between 1930 and 2012, government expenditures rose from 12.1% to 35.6% of GDP. And since 1930, tax receipts increased from 11.1% of GDP to 26.4%. Expenditures increased from 12.1% of GDP to 35.6%.
If the President and Congress are intent on continuing this expansionist tax policy, they need to cut unnecessary programs and bring efficiency and transparency to tax policy. Otherwise, they will tank the economy by increasing the nation's debt and eventually will drive more taxpayers into poverty.
Let the discussion begin...
To read Michael Schuyler's study, click on the following link:
"A Short History of Government Taxing and Spending in the United States."