Federal Tax Revenue In The United States

Federal Tax Revenue In The United States

Key Takeaways

The U.S. government gets most of its money from taxes on individuals and businesses, as well as taxes that pay for Social Security and Medicare. This money is used to pay for a wide range of things, programs, and services that help the American people and to pay the interest on loans. Most of the time, revenue is tracked by fiscal year (FY).

In addition to taxes, the government gets money from customs charges, leases of government-owned land and buildings, the sale of natural resources, different usage and licensing fees, and payments to federal agencies like the U.S. Department of the Interior.

People often relate federal income to gross domestic product (GDP). This comparison shows how big the federal government’s income is compared to the total amount of the country’s economic output. In the fiscal year 2022, the federal government made $25.02 trillion, which was 20% of the country’s overall gross domestic product (GDP), or economic activity.

Federal Revenue Overview

Where do the government’s funds come from? If you lived or worked in the United States in 2022, you probably paid taxes that added up to $4.90 trillion. The federal government also gets money from things like national park entrance fees and customs taxes on goods that come from and go to other countries. Most of this money is used to pay for government actions like salaries and upkeep of infrastructure, as well as for goods and services given to people and companies in the United States.

The federal government spent $6.27 trillion in FY 2022. The debt for 2022 was $1.38 trillion because the government spent more than it brought in. 

How the government gets money

Most of the money that the U.S. government gets comes from taxes paid by individuals, small businesses, and big companies. Tax money also comes from the fuel tax, the estate tax, and other taxes and fees. So far in FY 2023, 53% of all income has come from individual income taxes, while 34% has come from taxes on Social Security and Medicare.

Payments to federal agencies, such as the U.S. Department of the Interior, also bring in money for the government. Have you recently been to a national park? Did you know that the money you pay to get into a public park goes to the government? Other agencies get money from leases, the sale of natural resources, and fees for using their services and getting licenses.

Sources of Income for the Federal Government of the United States, FYTD 2023

Individual income taxes bring in $1.41 trillion, which is 52% of all revenue.
Taxes on Individual Income
Taxes on corporate income
Taxes on Social Security and Medicare
Other Customs Duties on Income
Estate & Gift Taxes
Excise Taxes

$2.69 B in total sales.

Individual and business income taxes will bring in $1.63T in FY 2023, which is 61% of the total earnings.

Why does the Federal Reserve give the government money?

Taxes for Social Security and Medicare

In contrast to personal income taxes, which pay for many different things, these taxes only pay for Social Security and Medicare. These funds come from your paycheck and, in most cases, are matched by your workplace. They are then put into different trust funds that support each of these programs.

The Old Age and Survivors Insurance Trust Fund (OASI) and the Disability Trust Fund (DI) are the two trust funds that makeup Social Security. With the money in these accounts, workers and their families can get insurance payments for retirement, unemployment, and death.

Medicare also has two accounts: the Hospital Insurance Trust Fund (HI), which is also called Medicare Part A, and the Supplementary Medicare Insurance Trust Fund (SMI). These funds pay for care for the old and crippled in hospitals, at home, in skilled nursing facilities, and in hospices.

From 1868 to 1913, taxes on booze, beer, wine, and tobacco made up 90% of all federal income.

Most of the money the government gets comes from taxes on income (both personal and business) and social safety (like the Social Security taxes mentioned above). As the chart below shows, when people and businesses make more money, the government gets more money because more money is collected in taxes. During times when tax rates are higher, revenue also goes up. On the other hand, the government gets less money when people or businesses make less money or when the tax rate goes down. In 2022, the U.S. government made more money than it ever had before.

If the U.S. government raises taxes on goods from one or more countries, it could bring in more money, based on how much trade the U.S. keeps doing with those countries. But if taxes go up and U.S. buyers import less because of the higher prices, then customs fees could bring in less money in total.

Since 2015, individual income tax has been the U.S. government’s major source of cash.

From $4.05T in 2015 to $4.90T in 2022, total income has gone up.

The U.S. economy and the changes in federal tax revenues

In the fiscal year 2022, government income was equal to 20% of the United States’ overall gross domestic product (GDP), which was $4.90 trillion.

Why do we compare government income to the country’s total income? The comparison gives a rough idea of how big the federal government is compared to how big the country’s economy is. Since people and businesses pay federal taxes based on a portion of their income, the amount of money the government gets from taxes goes up as people and companies make more money.

Leave a Reply