TAXIFOUNDATION

TAX FEATURESJune 1995 Volume 39, Number 5

Alternative Tax Plans Would Cut Compliance Costs

Ways & Means Testimony Puts Dollar Figure on Savings

In testimony before the House Ways &Means Committee June 6, Tax FoundationSenior Economist Arthur P . Hall estimated thatany of the three predominant alternative taxplans being discussed on Capitol Hill coulddramatically reduce America's tax-relate dcompliance burden, without necessarily

sacrificing a dime of federal tax revenue .Dr . Hall's analysis shows that complyin g

with the entire federal tax system—which helikens to a surcharge on all taxpayers— cost sAmericans $200 billion annually, $140 billionof which is attributed to the rules and regula-tions for the federal income tax alone (seeChart 1) . In his testimony, Dr . Hall noted on eway to comprehend the magnitude and eco-nomic waste of those costs : "Imagine puttingevery vehicle sold by General Motors in 199 4onto ships and dumping them into the ocean . "

In comparison, he calculates that Rep .Richard Armey's (R-Texas) flat tax proposal couldreduce the costs by 94 percent to $8 .4 billion ,assuming that the current convention of annua ltax filing is retained. However, if Rep . Armeyachieves his stated goal of eliminatin gindividual income tax withholding and movin gto monthly tax payments, the flat tax woul dreduce the cost by 72 percent to $38 billion .

A second alternative plan, Senator SamNunn (D-Ga.) and Senator Pete Domenici' s(R-N.M.) Unlimited Savings Allowance (USA)Tax System, could reduce the surcharge by 7 6percent to $33 .6 billion, according to Dr . Hall .And a third alternative, in the form of a nationalretail sales tax, could reduce costs by 9 2percent to $11 .2 billion, assuming the sales taxplan included a per-person rebate scheme toinstill progressivity . If no rebate scheme were

Compliance Costs continued on page 3

Chart 1 : Estimated Total Cost of Compliance fo rCurrent and Alternative Tax System s

$140,000

$140,00 0

$120,00 0

$100,00 0

* Rep . Dick Armey has proposed eliminating withholding with passage of his flat tax .** Proponents of a national sales tax have proposed rebates to offset effects o fregressivity.Source : Tax Foundation .

o $80,00 0

(a $60,00 0

$40,00 0

$20,00 0

$0

Current

Flat Tax

Flat Tax

USA Tax Retail Sales Retail SalesIncome Tax

Without

System

Tax With Tax Withou tSystem

Withholding*

Rebate**

Rebate

FRONT &CENTER Balancing the Budget: Revolution

or Common Sense?

2

State Tax Receipts Continue Rise State by State Tax Collections ,Per Capita and Per $1,00 0

State tax and fee collections grew by8.3 percent between 1993 and 1994 ,according to a new Special Report bySenior Economist Arthur Hall, title d"State Tax Rates and 1994 Collections . "The growth in inflation-adjusted taxcollections continues a trend that beganmore than a decade ago . In the report ,Dr . Hall notes that the three fastes tgrowing categories of state collectionswere license fees (33 .1 percent) ,property taxes (10 .6 percent), andcorporate income taxes (9 .9 percent) .

The growth rate of state tax collec-tions relative to personal income growthvaries substantially from state to state ,observed Dr. Hall . From 1993 to 1994 ,the five states that had the highest ta xgrowth relative to personal incomegrowth were New Hampshire, SouthDakota, Delaware, Utah, and Mississippi .The five states that had the highes tpersonal income growth relative to taxgrowth were Alaska, Rhode Island,

Louisiana, Pennsylvania, and Vermont .Alaska had the highest state taxe s

per capita ($2,647), followed by Hawaii ,Delaware and Connecticut (see accom-panying table) . Alaska also had thehighest state taxes per $1,000 ofpersonal income ($111 .23), followedby New Mexico, Hawaii, and Delaware .

Many states enacted legislation fo r1995 that alters individual income taxlaws via changes in deductions ,exemptions, and tax credits . However,five states changed (reduced) thei rincome tax rates : Arizona, Michigan ,New Jersey, New Mexico, and Ne wYork . Five states also changed(reduced) their corporate income taxrate: Arizona, Michigan, New Jersey ,New York, and Pennsylvania .

In the report, Dr . Hall lists th ecurrent personal and corporate businesstax rates, sales tax rates, gasoline taxrates, cigarette tax rates, and tax rate son liquor, wine, and beer by state . •

Per $1,000

PerPe r

CapitaPer $1,000Personal

Persona lIncom e

State Capita Rank Income Ran k

AL $1,153 47 $64 3 5AK 2,647 2 111 2AZ 1,491 21 78 1 3AR 1,266 39 75 1 9CA 1,660 13 74 2 3CO 1,111 48 50 5 1CT 2,190 5 74 2 1DE 2,312 4 101 5DC 4,420 1 142 1FL 1,278 37 59 4 2GA 1,243 40 61 3 9HI 2,464 3 102 4ID 1,526 18 84 6IL 1,344 33 57 4 5IN 1,376 29 68 3 0IA 1,538 17 76 1 8KS 1,395 28 67 32KY 1,420 26 80 1 1LA 970 51 55 4 8ME 1,453 22 74 22MD 1,588 16 64 3 7MA 1,835 8 72 2 6MI 1,610 15 72 2 5MN 1,872 6 83 7MS 1,314 36 83 8MO 1,199 44 58 43MT 1,356 32 76 1 7NE 1,317 34 64 34NV 1,680 12 70 27NH 1,225 43 52 50NJ 1,743 10 62 38NM 1,849 7 108 3NY 1,803 9 69 29NC 1,516 19 77 1 5ND 1,443 23 78 1 4OH 1,277 38 61 40OK 1,365 30 77 1 6OR 1,314 35 64 33PA 1,429 24 64 36RI 1,236 41 56 46SC 1,234 42 70 2 8SD 1,162 46 59 4 1TN 1,105 49 57 44TX 1,103 50 56 47UT 1,406 27 82 1 0VT 1,362 31 67 3 1VA 1,189 45 53 49WA 1,694 11 75 20WV 1,426 25 83 9WI 1,658 14 79 1 2WY 1,495 20 73 24

US $1,469 $67

Source : Tax Foundatio n

Who Claims Mortgage Interest Deductions?A contentious issue in the tax

reform debate will be whether to keepthe mortgage interest deduction . SeniorEconomist Arthur Hall developed thetable below, which offers an estimatedbreakdown by income group of whowill claim the deduction in 1995 an dthe average size of that deduction .For example, over 7 .6 millio ntaxpayers with incomes between

$50,000 and $75,000 will claim th ededuction this year . That figurerepresents about 69 percent of thetotal number of taxpayers for thatparticular income group . Thededuction will reduce this group' staxable income by an estimated$64.4 billion, or an average of $8,389per taxpayer/homeowner withinthe group .

Income (AGI) Group

Est . No . o fTaxpayer sClaimin gDeduction

Est . Share o fTaxpayersClaimin gDeduction

Est. Tota lAmount o fDeduction

($Thousands)

Est . Avg .Deductionper Claim

Under $10,000 460,464 1 .38% $3,108,747 $6,75 1$10,000 under $20,000 1,728,934 6 .56 10,883,926 6,29 5$20,000 under $30,000 3,297,731 18 .52 20,149,155 6,11 0$30,000 under $40,000 4,419,847 35 .10 29,340,151 6,63 8$40,000 under $50,000 4,652,321 51 .70 33,570,993 7,21 6$50,000 under $75,000 7,673,964 69 .40 64,376,528 8,38 9$75,000 under $100,000 2,684,288 79 .14 29,772,648 11,09 1$100,000 under $200,000 1,888,855 78 .62 30,118,974 15,94 6$200,000 under $500,000 506,269 76 .44 12,259,783 24,21 6$500,000 or More 124,433 67 .98 4,543,593 36,51 4

Total 27,437,105 23 .50 238,124,499 $8,67 9

Source : Tax Foundation .

3

New Book Simplifies Presentation of Federal Budget

.tO

~/ ,cO~~tO

As Congress begins the process oftrimming federal spending this year ,journalists and many policy makershave exhibited a growing interest i nunderstanding the budget . As anyon ewho has examined the federal budge tquickly realizes, it's a tedious, vexin g

\

job trying to determine exactly where\ the federal government spend s

money and exactly how muc h\

it spends .The Tax Foundation has

now made the job easier withthe publication of a newbook, A Taxpayer's Guide

to Federal Spending .Economist Patrick Fleenorhas distilled the federalbudget into a working

document, with FY 1996' sprojected $1 .61 trillion in

expenditures organized bydepartment, agency, program area ,and individual expenditure account .In addition, pie charts throughout th ebook offer a concise picture of howeach department divides its budge tamong component agencies and majorprogram areas .

Mr. Fleenor's presentation makesreading and understanding the budget alot easier for those who find the Offic eof Management and Budget's traditionalpresentation hard to comprehend . Forexample, if readers are interested infinding out where the Department ofDefense ranks in terms of overall federa lspending, they could simply flip tothe opening chapter of the book an dexamine the initial pie chart . Todetermine where the TreasuryDepartment spends its money, a readercan turn to the opening page of thatdepartment's chapter, where he wouldfind that outlays on interest paymentson the national debt comprise 90 . 3percent of Treasury's total spending .

Similarly, if readers want to quicklyascertain the impact of eliminating theDepartment of Commerce, a quick lookat the pie charts would tell them thatthe department spends less than onepercent of total net outlays — and tha t70.9 percent of this spending fundsscience and technology projects .

The book, 8-1/2" X 11", softbound ,with 326 pages, is available to thepublic for $45 . •

Compliance Costs

Continued from page 1

part of the retail sales tax, Dr . Hall say sthe plan could reduce the surchargeby an estimated 96.5 percent to$4 .9 billion—but the entire burde nof compliance would fall on retai lbusinesses .

The inherent complexity of anincome tax base bears mos tpredominantly on the income taxationof commercial activity, observed Dr.Hall . In fact, compliance costs forAmerican businesses in recent yearshave amounted to three-fourths of theirincome taxes . That means in 1991 ,while businesses paid approximately$110 billion in income taxes, they hadto spend some $81 billion just to complywith the tax laws .

As Chart 2 clearly shows, businesse scould see a significant lowering of th enumber of hours spent complying withthe federal tax code if any of the alter-native tax systems are adopted . •

Chart 2: Estimated Total Business Hours Spent Complyin gwith Alternative Tax System s

$1,680,442,86 7

$1,600,000,000 —

$1,400,000,000aU-o $1,200,000,000

.o

$1,000,000,000

Current

Flat

USA

Retai lIncome Tax

Tax

Tax

SalesSystem

System

Tax *

*Includes a per-person rebate scheme .Source : Tax Foundation, using Internal Revenue Service data and estimation methods .

$83,113,966 $123,484,848 —$88,003,02 3

$800,000,00 0

$600,000,00 0

$400,000,00 0

$200,000,000

4

Balancing the Budget:Revolution or Common Sense?

Since when is it revolu-tionary to cut needless bureau-cracy, reestablish spending priori -ties, reform ineffective welfareprograms, attack corporatesubsidies, and cut foreign aid?

And since when is it revolu-tionary to preserve the America ndream of leaving our children aworld better than we found it?

Only in Washington . Wherecommon sense takes a back sea tto protecting the status quo .

For those millions of familie swho gather around kitchen table sto figure out how to make end smeet each month, the wordrevolution doesn't enter thediscussion; a better word is reality .For them deficit spending mont hafter month is not an option . Forthem the expression "toughchoices" has real meaning, as i npick one: braces for the kids 'teeth or a family vacation .

It's no wonder people are inawe when they visit Washingto nfor the first time. The conven-tional wisdom is that it's thebeautiful and historic memorials ,monuments, and museums alon ethat catch their eye and spark theirinterest . Not exactly . It's also thefrightening realization that amids tthe beauty lies the bureaucracy.That within the huge and numer-ous buildings work the bureaucratsand politicians who spend their taxdollars, regulate their lives an dbusinesses, and purport tomake their lives better, safer ,and happier .

I'm reminded of the "Wizar dof Oz." Until the curtain is tornaway revealing only an insecurelittle man, the wizard was believedto be an omnipotent and indomi-table being . I'm further remindedof a group of my constituent sfrom a Columbus, Ohio, suburbwhose recent visit to Washingto nsums up where we have come an dhow far we have to go .

My constituents came to tel l

In 1969 man walked on themoon for the first time and Congressbalanced the budget for the last time .For 26 years our revolutionary spac eprogram has prospered whil ecommon sense budgeting has beenforsaken .

Today we're trying to balanc ethe federal budget and modern dayrevolutionaries we've become .Inside the Washington Beltway, tha tis . Our allies say we're revolutionar-ies because of the boldness an d

For those millions offamilieswho gather around kitchen tables

to figure out how to make ends meeteach month, the word revolutio n

doesn't enter the discussion; abetter word is reality.

scope of our undertaking. Our foesaccuse us of fomenting a revolutionof apocalyptic proportion .

To families around the country ,though, balancing the budget isn' trevolution, it's common sense andthe moral thing to do. Their messageto Congress is simple : If we can livewithin our means, so can you. Jus tdo the right thing and preserve th efuture for our children and grand-children .

Since when is it revolutionary totake power, money, and influenc efrom the federal government an dreturn it to the states and the people ?

Since when is it revolutionary toslow the rate of growth of govern-ment spending, such that we'll spend$11 .9 trillion over the next sevenyears rather than $13 .3 trillion andstill balance the budget?

Since when is it revolutionary tosave Medicare from going bankruptin seven years ?

Rep. John R. Kasich(R-Ohio)

FRONT &CENTER

5

me of their opposition to th ewelfare reform proposal the nbefore Congress . The room w ewere in had a panoramic view ofWashington's federal officebuildings. Do you know whoworks in those buildings, I asked .No, the said . It's the federalbureaucrats who run the program syou are concerned about . Haveyou ever met any of them? Again ,the answer was no. Do you thin kany of those workers would knowwhere your hometown is ?Probably not . Would they evenknow what time zone Ohiois in? Unlikely.

So, I said, what makes youthink these people in Washington ,who you've never met, who don' tknow anything about your hom etown, and probably don't knowwhat time zone you live in, can d oa better job of solving ourproblems than we can back home ?

My constituents discussed itamong themselves and soondeparted, saying they wouldreevaluate their position . Whatother response could they havehad? The curtain had been tornaway revealing well-intentioned butineffective bureaucrats . Therereally is no place like home when i tcomes to accepting responsibilityand solving problems .

Congress is currently puttingthe finishing touches on the fiscalyear 1996 budget, a seven-year plan

that balances the budget by 2002 .The House-passed budget is a nhonest plan that shows in candiddetail the types of changes andsacrifices we would all haveto make in order to slow the rat eof growth of government spendingand bring it in line with growingrevenues .

But the determined pursuit o fa balanced budget is much morethan a numbers game . It's acatalyst for reevaluating th egovernment down to its core .Getting government back to livingwithin its means will requirefundamental, systemic reform ,including the following steps :

Provide Tax Relief—Our planprovides for a $500 per child taxcredit, 74 percent of which goes t ofamilies earning less than $75,00 0per year . We also would reducethe capital gains tax rate, whic hwill promote economic growthand create jobs .

Attack Corporate Subsidies —Our plan terminates billions infederal grants to many of th enation's largest corporations .

Save Medicare—The MedicarePart A Trust Fund is projected t obe completely broke in sevenyears . The Part B Trust Fundalready draws tens of billions fro mthe general revenue each year jus tto stay afloat . To save Medicare itmust be transformed and its rateof growth must be slowed fromthe current 10 percent to aroun dseven percent . Our plan provide sthree illustrative paths for savingMedicare .

Eliminate Needless Bureau-cracy—Our plan calls for theelimination of three cabinet-leve ldepartments (Commerce, Educa-tion, and Energy), and th eelimination or privatization of 1 3agencies, 69 commissions, and284 programs .

Cut Foreign Aid—Many foreig naid programs are wasteful an dcounterproductive . Reforming

them will save taxpayers billionsof dollars .

Reform Welfare—The curren twelfare system hurts the people itis supposed to help . It shacklesthem to a life of dependenc yrather than pushing them towardself-sufficiency . Our plan incorpo-rates the Personal ResponsibilityAct of 1995, which the Hous epassed as part of the Contract withAmerica . This plan maintains asafety net that will not entangl eits beneficiaries . It renews thebasic values of American civiliza-tion, emphasizing work, family ,and opportunity .

Strengthen NationalDefense—The defense strategyreflected in ourbudget is respon-sible, sustainable, and matched b ythe requisite number of dollars—in contrast to the mismatc hbetween spending and strategyreflected in the Clinton budget .

Protect Social Security—As wepromised, this budget makes nochanges in Social Security benefits ,and it repeals the increased taxe son Social Security benefits im-posed as part of the 1993 Clintontax plan .

It's time to balance the federa lbudget . It's no longer a questio nof if, but how. We've laid anhonest, fair plan that requireseveryone in this country to stepup to the plate and be a part of thesolution. Our plan pushes backthe pendulum, which has swungtoo far in favor of big governmen tat the expense of the everydayperson and the American family .To ensure the future of thiscountry and the prosperity of th enext generation, we must act now .The window of opportunitybefore us won't last forever.

Hardly a revolution . Jus tcommon sense . •

The views expressed in Front & Centerare not necessarily those of the TaxFoundation.

6

Foundation Analysis Examines Middle-Class Family

How Would Tax Reform Affect the Jones Family ?With the push for tax reform

gaining momentum on Capitol Hill ,what's the bottom line for Americantaxpayers? To illustrate the differenttax rules and effects for individual sunder the alternative plans, TaxFoundation Senior Economist ArthurHall assisted the Cable News Network

(CNN) in calculating a speciallyselected Tennessee family's tax burdenunder three major reform plans ,comparing these burdens with theburdens under the current income taxsystem. The Tax Foundation has nowpublished its findings in a Specia lReport, "How Will Alternative Tax

Reform Plans Affect the Jones Family? "(The Tax Foundation changed their las tname in the report to ensure privacy . )The report also provides thefundamental rules of each of the ta xreform plans .

The three alternative tax reformplans examined are the flat taxintroduced by Rep . Dick Armey (R-Texas) and Sen . Richard Shelby (R-Ala .) ;the Unlimited Savings Allowance (USA)Tax System sponsored by Senators Pet eDomenici (R-N .M.) and Sam Nun n(D-Ga .) ; and a national retail sales taxadvocated by presidential candidateSen . Richard Lugar (R-Ind .) .

Chart 1 reports the "bottom line "for the Joneses under each tax system .Dr. Hall's analysis showed that, whilethe Joneses owe $4,286 under thecurrent federal income tax system, thefamily would have a tax liability o f$3,113 under the Armey-Shelby flat taxproposal, at the initial 20 percent taxrate . Under the USA Tax, the Jonese swould owe $2,322 at the higher initia ltax rates . The national sales tax, set at a17 percent rate, would result in a taxliability of $5,594 . •

Chart 1 : Estimated Tax Liabilities for the Joneses Unde rCurrent System and Alternative Tax Plan s

Current Law

Source : Tax Foundation .

Flat Tax USATax

System

NationalSale sTax

Chart 2: Tax Consequences of Jones Family's$47,066 Income under the Flat Tax

Tax Liabilit y(20% Rate)

$3,11 3

DependentExemptio n

$5,300

Source : Tax Foundation .

Persona lAllowance s

$26,200

Chart 3 : Tax Consequences of Jones Family' s$47,066 Income under the USA Ta x

RefundableCredit fo r

Payroll Tax$3,630

Tax Liability$2,322

Exemption s$7,65 0

Previously Taxe dSaving s

$65 3

Mortgag eInteres t$4,250

Charity$240

Source : Tax Foundation .

Dependen tExemptio n

$5,300

7

FOUNDATIO NM ESSAG E

Tax FoundationCited in NewlyPublished Books

Two tax-related booksthat hit the bookstores in recen tmonths have, tomake their points ,highlightedTax Foundationresearch . Bothare primers thatundertake to teac hAmericans aboutthe tax system ,though thesimilaritiesstop there .

A Guide toUnderstanding Your Taxes is aWall Street Journal effort publishe dby Lightbulb Press and Dow Jones &Co. Co-authored by Journal reporte rScott R. Schmedel an dcommunication specialists KennethM. Morris and Alan M . Siegel, theGuide offers an interesting an deducational overview of the U .S .tax system—including a historicalperspective on taxation, a lesson onfiling your taxes, and a discussio nabout tax planning .

The Tax Foundation's researc his highlighted in several sections ,including a chart comparing taxburdens in various industrialize dnations and another citing TaxFreedom Day data .

Journalist Martin L . Gross's TheTax Racket. Government Extortion

from A to Z offers a more criticalexamination of the federal, state, andlocal tax system in this country .Published by Ballantine Books, Mr .Gross's publication starts with "Air-line and Airport Taxes" and cleverlyworks through the alphabet of taxation .In the process, the author cites TaxFoundation research in such areas astotal tax burden and estate taxes ,while making a case for reforming theU.S . tax system. Mr. Gross support sreplacing the income tax with anational sales tax . •

The President Enters theBudget Debate Finally

In the movie "Top Gun", Tom Cruise plays an F-14 fighter pilot with th ecall sign "Maverick" . At the end of the movie, Maverick has a big problem—h ecan't "engage ." That is, he can't bring himself to enter into a dogfight of Sovie tfighters playing live-fire cat and mouse with another American F-14 . Finally,Maverick finds the nerve to nose his plane back into the fight .

In a way, that's exactly what President Clinton has done by submittin ghis own plan to balance the budget . He has gone from recent spectator t oparticipant in the battle for a balanced budget . In choosing to engage ,the President must have known he would be sneered at by the congressiona lbudget cutters, who are well into the third quarter of the annual budget cycle ,having already done most of the heavy lifting; by submitting a new budget thePresident has basically completed his pregame warm-ups.

He also knew he would be roundly attackedby members of his own party because he wa sagreeing to cut the spending programs they foughtso hard to create and protect . And, after leadingcongressional Democrats in saying the Republican swere wrong to try to eliminate the budget deficit ,he left them to find their own way when he too kthe off ramp of the deficit spending highway .

Even a day late and a dollar short, thePresident showed political courage by submittin ga second budget for this year . But the credit i stempered by the fact that he had no choice .

The President submitted a budget at the startof the year showing large and growing deficits .He and his staff spent the following months sayin gthe Republicans couldn't reach a balanced budge t

and, when they reported out two such budgets, he said they shouldn't hav etried. Essentially, the President had backed himself into the untenable positio nof actively supporting permanent deficit spending . He had to get out of thi strap and the only way to do this was to submit a budget showing a balance a tsome future date . Had he stood pat with his February budget, he would trul yhave been a spectator to the debate, with only his veto pen to assure a modes tdose of relevance .

But the price of relevance was steep . By submitting his new budget, th ePresident has affirmed that the deficit hawks of both parties have been right al lalong . Whatever the short-term political considerations, fiscally the Presiden tdid the right thing . There is now all the more reason to hope that chroni cdeficit spending will soon be an extinct species of fiscal policy.

There remains, however, the little matter of tax cuts . By submitting hisnew budget, the President has also gained a say about the direction of ta xpolicy, and here he is on much surer footing because tax cuts must be full ypaid for . There in lies true leverage that he can now apply having bought aseat at the table .

When it comes to cutting taxes, the basic fight is and has been two-dimen-sional . First, should tax cuts be targeted to economic, rather than social, policy ?Second, what is the distribution of the tax relief? In both, the political lines ar ewavy, which gives the President maneuvering room. As we get into autumn ,the issue will be the tax cuts, not whether the budget should be balanced inseven or 10 years . And the President will be a party to the tax debate .

In "Top Gun," Maverick is able to dispatch the offending Soviet Migs ,save his plane, and return to his carrier a hero . It's unlikely the President wil lcome out of this fight a hero, but he has at least given himself a chance t ofight another clay .

J.D. Foste rExecutive Director an dChief Economist

8 U.S. Tax Collections Soar to $2.183 TrillionGovernments Will Collect $21, 760 for Every Household

TAX FEATURES

Tax Features (ISSN 0883 -1335) is published monthlyby the Tax Foundation, a nindependent 501(c)(3)organization chartered i nthe District of Columbia.Annual subscriptions to thenewsletter are $15.

Co-ChairmanDominic A . Tarantino

Co-ChairmanJames C . Miller III

Chairman, Progra mCommitte eE . Noél Harwert h

Distinguished FellowThe Honorable Bill Frenze l

Executive Director an dChief Economis tJ .D . Foster

Administrator and Director,Foundation Developmen tC . Gaye Bennett

Adjunct Fello wCharles E. McLure, Jr .

Special Tax Counse lJ . Dwight Evans

Tax Counse lLynda K. Walker

Director, CorporateDevelopmentReneé Nowland

Editor an dAssociate Director/Communications DirectorStephen Gol d

Tax Foundatio n(202) 783-2760 Te l(202) 942-7675 Fax

Total tax collections in the U.S . areexpected to equal $2 .183 trillion in 1995 ,according to an analysis by the Tax Foundation .That represents a 5 .7 percent increase over1994 total tax collections and a 31 percent ris eover the 1990 level .

To put this figure into perspective, federal ,state, and local governments will collect anaverage of $8,303 for every American, o r$21,760 in taxes for every household .

The analysis by Foundation Economist

Patrick Fleenor showed that the federalgovernment is expected to collect 66 percen tof this total, or $1,436 billion . State and localgovernments will collect another $747 billion .

The accompanying chart illustrates tha tthese funds stem from a variety of sources .The two levies extracted from Americans' pay-checks, individual income taxes and socia linsurance taxes, are the two largest sources ofrevenue. Individual income taxes will repre-sent a third of all tax receipts, or $719 billion . .

Tax Foundatio n1250 H Street, NWSuite 750Washington, DC 20005-390 8

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