How much taxes does the federal government collect each year

Table of Contents Show

HOW THE U.S. BUDGET IS FUNDED
WHO PAYS THE MOST?
TAXES BY INCOME LEVEL
IS THE UNITED STATES COLLECTING ENOUGH TAX?
How much money is collected in taxes each year in the US?
How much money does the IRS collect each year?
How much money does the federal government collect?
How much of the federal government's income comes from individual income tax?

TOTAL REVENUES

The federal government collected revenues of $3.5 trillion in 2019—equal to about 16.3 percent of gross domestic product (GDP) (figure 2). Over the past 50 years, federal revenue has averaged 17.4 percent of GDP, ranging from 20.0 percent (in 2000) to 14.6 percent (most recently in 2009 and 2010).

INDIVIDUAL INCOME TAX

The individual income tax has been the largest single source of federal revenue since 1950, amounting to about 50 percent of the total and 8.1 percent of GDP in 2019 (figure 3). In recent years, individual income tax revenue has climbed as high as 9.9 percent of GDP (in 2000) at the peak of the 1990s economic boom and dropped as low as 6.1 percent (in 2010) following the 2007–2009 Great Recession.

CORPORATE INCOME TAX

The tax on corporate profits yielded 7 percent of government revenue in 2019, a revenue source that has been trending downward. Revenue from the tax has fallen from an average of 3.7 percent of GDP in the late 1960s to an average of just 1.4 percent of GDP over the past five years, and 1.1 percent of GDP most recently in 2019 (figure 3).

SOCIAL INSURANCE (PAYROLL) TAXES

The payroll taxes on wages and earnings that fund Social Security and the hospital insurance portion of Medicare make up the largest portion of social insurance receipts. Other sources include payroll taxes for the railroad retirement system and the unemployment insurance program, and federal workers’ pension contributions. In total, social insurance levies were 36 percent of federal revenue in 2019.

The creation of the Medicare program in 1965, combined with periodic increases in Social Security payroll taxes, caused social insurance receipts to grow from 1.6 percent of GDP in 1950 to 6.2 percent in 2009 (figure 3). A temporary reduction in employees’ share of Social Security taxes—part of the stimulus program following the financial meltdown—reduced social insurance receipts to 5.3 percent of GDP in 2011 and 2012. Social Insurance tax receipts have since climbed back to 5.9 percent of GDP in 2019.

FEDERAL EXCISE TAXES

Taxes on purchases of goods and services, including gasoline, cigarettes, alcoholic beverages, and airline travel, generated 2.9 percent of federal revenue in 2019. But these taxes, too, are on the wane: excise tax revenues have fallen steadily from an average of 1.7 percent of GDP in the late 1960s to an average of 0.5 percent over 2015 to 2019 (figure 3).

OTHER REVENUES

The federal government also collects revenue from estate and gift taxes, customs duties, earnings from the Federal Reserve System, and various fees and charges. In total, these sources generated 5.0 percent of federal revenue in 2019. They have ranged between 0.6 and 1.0 percent of GDP since 1965 (figure 3). In recent years, the figure has been on the high end of that range because of unusually high profits of the Federal Reserve Board related to its efforts to stimulate the economy since 2008.

SHARES OF TOTAL REVENUE

The individual income tax has provided nearly half of total federal revenue since 1950, while other revenue sources have waxed and waned (figure 4). Excise taxes brought in 19 percent of total revenue in 1950, but only about 3 percent in recent years. The share of revenue coming from the corporate income tax dropped from about one-third of the total in the early 1950s to 7 percent in 2019. In contrast, payroll taxes provided more than one-third of revenue in 2019, more than three times the share in the early 1950s.

Updated May 2020

WASHINGTON (Reuters) - The U.S. government’s over $4 trillion annual budget, the world’s largest, relies heavily on individual wage earners whose taxes and retirement benefits are deducted from every paycheck, leaning particularly on the top 20% of income earners.

FILE PHOTO: The Internal Revenue Service (IRS) building is seen in Washington, U.S. September 28, 2020. REUTERS/Erin Scott/

Corporations pay just a fraction of what individuals do into the federal spending pool, which funds the military, transportation safety, veterans benefits, regulatory agencies and programs like NASA.

A New York Times investigation here published on Sunday shows that President Donald Trump paid just $750 in federal taxes during the years straddling his 2017 inauguration, and none at all for 10 of 15 years before then. Trump dismissed the report as "fake news."

Trump reported here income of at least $594 million for 2016 and early 2017 and assets worth at least $1.4 billion, in a financial disclosure in June 2017.

HOW THE U.S. BUDGET IS FUNDED

Individuals, whether they are self-employed or earn a paycheck from a small business or a giant corporation, foot most of the federal government’s bills.

Individual income tax funds U.S. federal spending:

Of the $3.46 trillion in receipts taken in by the U.S. Treasury during fiscal 2019, nearly half came from the $1.72 trillion in individual income taxes collected.

In addition, $1.24 trillion in Social Security and Medicare taxes were paid by individuals, bringing their share to 85%.

Taxes paid by corporations last year totaled $230 billion, or just 6.6% of the total in 2019. The remainder of federal revenues are made up from customs duties on imported goods, excise taxes such as those on gasoline, estate taxes and other miscellaneous taxes and fees.

WHO PAYS THE MOST?

W2 wage earners - those with a regular paycheck from a business, government entity or non-profit - make up the largest share of tax revenue through income tax and social insurance withholdings, like the payroll tax that funds Social Security, the government retirement program.

Those withholdings can reduce here Americans' take-home pay by nearly 40%, depending on income, and have made up about 73% of total revenue over the past two fiscal years through August.

Despite high unemployment because of the coronavirus pandemic, withheld income taxes in 2020 have fallen less than 1% from 2019 levels, partly due to higher earnings early in the year and aid to small businesses that kept paychecks coming to many idled employees over the spring and summer months.

Self-employed people, including many business owners, and those paying capital gains or other taxes not withheld from their paychecks, make up the second-largest category, funding around 19% of the total tax revenue during fiscal 2020 through August.

TAXES BY INCOME LEVEL

The U.S. tax system has been described as "progressive," meaning that the share of taxes paid rises with income, through seven here tax brackets.

The very poorest, those making under $9,875 a year, are taxed at a 10% rate, while the wealthiest, or those making $518,400 and over are taxed at a 37% rate. But what the wealthiest pay is often much lower due to a variety of complicated tax loopholes, which can benefit hedge fund managers, private equity firm partners and real estate investors.

The 2017 tax cuts passed by Republicans and signed by Trump largely kept that relationship intact, but shifted more of the tax burden to wealthy and upper-middle-class wage earners. But income deductions for mortgage interest and state and local taxes paid, the biggest middle-class tax breaks, were reduced considerably.

A pre-pandemic Congressional Budget Office estimate here projected the top 20% would pay 69.7% of federal taxes in 2021.

U.S. federal taxes paid by income group:

America's 37% top marginal tax rate is lower than the top rates for many wealthy and developing countries, including the OECD average of 41.2%, according to here KPMG.

Corporations got a major tax cut in the Republican bill, when their tax rate before deductions was slashed to 21% from 35%.

IS THE UNITED STATES COLLECTING ENOUGH TAX?

No. Even before the coronavirus pandemic sparked a deep recession this year, the federal budget deficit here in fiscal 2019 was $984 billion and was forecast in January to top $1 trillion in fiscal 2020, which ends on Wednesday.

Massive spending to keep businesses and households from collapsing is expected to drive the fiscal 2020 deficit to $3.3 trillion, dwarfing the previous record of $1.4 trillion in 2009 and making up the largest share of gross domestic product since the end of World War Two.

If action is not taken to shrink deficits in future years through spending cuts or tax increases, the CBO has warned that federal debts as a percentage of GDP will double by 2050.

Reporting by David Lawder; Editing by Heather Timmons and Peter Cooney

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How much money is collected in taxes each year in the US?

U.S. Tax Revenue by Year.

How much money does the IRS collect each year?

During Fiscal Year (FY) 2021, the IRS collected more than $4.1 trillion in gross taxes, processed more than 261 million tax returns and other forms, and issued more than $1.1 trillion in tax refunds (including $585.7 billion in Economic Impact Payments and Advance Child Tax Credits).

How much money does the federal government collect?

In fiscal year 2022, the federal government is estimated to spend $5.8 trillion, amounting to 23.5 percent of the nation's gross domestic product (GDP). Of that $5.8 trillion, over $4.8 trillion is estimated to be financed by federal revenues.

How much of the federal government's income comes from individual income tax?

Half of all federal revenue (50 percent) comes from individual income taxes. The income tax is generally progressive: higher-income households generally pay a larger share of their income in income taxes than lower-income households do.