Federal Expenditures Rose from 2.7% to 24% of Economic Output
Washington, D.C., February 20, 2014— Federal, state, and local government taxation and spending have significantly increased over the past century, according to a new report by the nonpartisan Tax Foundation.
Between 1900 and 2012, federal government receipts increased from 3.0 percent of the economy’s output to 16.5 percent, and federal expenditures rose from 2.7 percent of economic output to 24.0 percent.
Between 1930 and 2012, state and local government receipts grew from 8.0 percent to 13.0 percent of economic output, while their expenditures rose from 9.1 percent to 14.8 percent of output.
From 1930 to 2012, total government revenue grew from 11.1 percent of GDP to 26.4 percent of GDP, and total government spending grew from 12.1 percent of GDP to 35.6 percent of GDP.
Until 1940, state and local government were responsible for most government spending and collected most government revenues, except during major wars.
The report concludes that federal, and to a lesser extent state and local, tax and spending may be poised to increase substantially, citing an aging population and the Patient Protection and Affordable Care Act as driving forces being the possible boost.
“The PPACA includes an array of major new federal taxes, fees, requirements, and government assistance programs, and also puts upward pressure on state government spending,” said Tax Foundation Fellow Michael Schuyler. "The federal government has also promised Social Security and Medicare benefits to seniors without setting aside any real assets to redeem those promises.”
Additionally, the federal government has not funded some of the benefits it promises to federal workers after they retire, and many states and localities have inadequately funded their workers’ pensions.
“If the government sector expands further, it will become even more vital than it already is to trim unnecessary or low-return spending programs and to strive for simplicity, economic efficiency, and transparency in tax policy to grow the economy,” added Schuyler.
The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.