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Debt Level: Recessions + Corporate Tax Accounting Changes Led to Revenue Underperformance (Relative to GDP Growth) USA Federal Receipts by Type ($B in 2005 Constant Dollars), 1965 — 2010 —— Individual Income Taxes =» Lower Corporate Taxes* 0 c T T T T T T T T —T 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 oO wh 3 1,000 -- ——Corporate Income Taxes N Recessions £ ” Oe oo \ 4 ----- 7 i (") f 2001 / 2003 a 1981 —> 5 Tax Cuts Tax Cuts E£ 600 -------------------------f%- Ne pot ------------------------ RBBB ------ eee L 5 1981 2 Accelerated Cost Ps 400 © RecoverySystem = &B ® = 3 2 3 £ Note: * The adoption of Accelerated Cost Recovery System allowed companies to utilize accelerated depreciation on capital investments, leading to higher depreciation costs and lower taxable income. Source: White House Office of Management and Budget. Note that recession-related tax cuts can be KP doubled edged — reducing tax revenue but enhancing GDP growth. (@E www.kpcb.com USA Inc. | Income Statement Drilldown 151 Debt Level: In the Past, Social Security’s Surpluses Have Masked USA Inc.’s True Borrowing Needs by $1.4T e Social Security tax receipts exceeded outlays in every year between 1984 and 2008, leading to a cumulative surplus of $1.4 trillion. e These surpluses have been used to fund other parts of federal government operations (including Medicaid, infrastructure and defense...) under the unified budget accounting rules. Without these past Social Security surpluses, USA Inc. would have to have issued $1.4 trillion more debt (or 16% higher than current level of debt) to fund its operations. Social Security Cumulative Real Operating Surpluses / Deficits, 1982-2010 & $120 i) E 3 $80 £ 2 Fe $40 C7) é $0 2 — P=] & -$40 ” s 8 -$80 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Note: Surpluses & deficits exclude Trust Fund interest income, adjusted for inflation. KP Data source: Congressional Budget Office. (@E www.kpcb.com USA Inc. | Income Statement Drilldown 152 HOUSE_OVERSIGHT_020917