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Allocating Tax Burdens and Government Benefits by Income Class, 1972-73 and 1977

2 min readBy: TF Staff

Download Government Finance Brief No. 31

Executive Summary

Federal, state, and local government expenditures totaled $758.6 billion in 1979, almost $10,000 per household and 32 percent of the nation’s total output of goods and services. Most of this spending was financed by taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es. Thus, the questions of who pays and who benefits from government fiscal operations are far from trivial.

This study provides insights into such questions of fiscal equity. Based on the latest comprehensive nationwide survey of consumer income and expenditures, recently published by the Bureau of Labor Statistics, the study develops estimates of tax burdens and the benefits of government expenditures for families grouped according to the size of their income. In particular, the questions addressed are how the taxes paid and the government benefits received by persons in different income groups compare with their incomes.

This Brief summarizes the major findings, generally those based on the study’s standard assumptions, and provides a brief description of the concepts, methodology, and assumptions employed.

The full study contains detailed explanations of these methods and assumptions, as well as estimates of fiscal incidence under a variety of alternative assumptions. The emphasis here is on the estimates for 1972-73, the year corresponding to the survey data, since they are internally consistent. The estimates for 1977, presented in the Appendix, should be regarded as provisional, since they are not adjusted for upward shifts in the distribution of income and associated consumption patterns since 1972-73.

Elliott Dubin, Senior Research Analyst, had primary responsibility for the research and drafting of the study.