U.S. federal tax revenue is made up of the total tax receipts received by the government each year. Most of it is paid either through income taxes or payroll taxes. The rest is made up of estate taxes, excise and custom duties, and interest on the Federal Reserve’s holdings of U.S. Treasurys.
Key Takeaways
- The bulk of federal tax revenue comes from income taxes, payroll taxes, and corporate taxes.
- FY 2023 federal revenues aren’t enough to pay for spending. That creates a projected $918 billion budget deficit.
- Tax cuts implemented by Presidents Bush, Obama, and Trump to drive economic growth further reduced revenues.
- Tax revenue has grown steadily over the past 60 years. It eclipsed $1 trillion for the first time in 1990.
Current Revenue
The U.S. government’s total revenue is estimated to be $4.71 trillion for FY 2023.
Per the White House’s projections, income taxes are slated to contribute $2.35 trillion. Another $1.59 trillion will come from payroll taxes. This includes $1.10 trillion for Social Security, $342 billion for Medicare, and $55 billion for unemployment insurance. Corporate taxes will add another $284 billion.
The White House also predicts the Federal Reserve, whose revenue comes from a variety of sources, will contribute $76 billion in 2023. The Fed is the bank for federal government agencies, and it pays interest on the billions of dollars in operating funds deposited by these agencies. The remainder of federal revenue comes from excise taxes, tariffs on imports, miscellaneous receipts, and estate taxes.
How Revenue Relates to the Deficit, Debt, and GDP
The government’s annual income doesn’t cover its spending, which is projected to create a $918 billion budget deficit in 2023. Deficits add to the national debt
Many argue that Congress should only spend what it earns, but that depends on where the economy is in the business cycle. For example, Congress should use deficit spending to expand economic growth in a recession and stimulus spending to create jobs. Once the recession is over, the government should switch from expansionary to contractionary fiscal policy because it’s the best time to raise taxes and reduce the deficit and national debt. It also keeps the economy from overheating and forming dangerous bubbles.
Note
The government’s 2023 tax revenue projection is 18.1% of gross domestic product (GDP), which is a measurement of a nation’s economic output.
U.S. Tax Revenue by Year
Here’s a record of income for each fiscal year since 1962. Tax receipts fell off during the recession but started setting new records by FY 2013.
| FISCAL YEAR | REVENUE |
|---|---|
| FY 2021 | $4.05 trillion |
| FY 2020 | $3.42 trillion |
| FY 2019 | $3.46 trillion |
| FY 2018 | $3.33 trillion |
| FY 2017 | $3.32 trillion |
| FY 2016 | $3.27 trillion |
| FY 2015 | $3.25 trillion |
| FY 2014 | $3.02 trillion |
| FY 2013 | $2.78 trillion |
| FY 2012 | $2.45 trillion |
| FY 2011 | $2.30 trillion |
| FY 2010 | $2.16 trillion |
| FY 2009 | $2.11 trillion |
| FY 2008 | $2.52 trillion |
| FY 2007 | $2.57 trillion |
| FY 2006 | $2.41 trillion |
| FY 2005 | $2.15 trillion |
| FY 2004 | $1.88 trillion |
| FY 2003 | $1.78 trillion |
| FY 2002 | $1.85 trillion |
| FY 2001 | $1.99 trillion |
| FY 2000 | $2.03 trillion |
| FY 1999 | $1.83 trillion |
| FY 1998 | $1.72 trillion |
| FY 1997 | $1.58 trillion |
| FY 1996 | $1.45 trillion |
| FY 1995 | $1.35 trillion |
| FY 1994 | $1.26 trillion |
| FY 1993 | $1.15 trillion |
| FY 1992 | $1.09 trillion |
| FY 1991 | $1.06 trillion |
| FY 1990 | $1.03 trillion |
| FY 1989 | $991.1 billion |
| FY1988 | $909.2 billion |
| FY 1987 | $854.3 billion |
| FY 1986 | $769.2 billion |
| FY 1985 | $734.0 billion |
| FY 1984 | $666.4 billion |
| FY 1983 | $600.6 billion |
| FY 1982 | $617.8 billion |
| FY 1981 | $599.3 billion |
| FY 1980 | $517.1 billion |
| FY 1979 | $463.3 billion |
| FY 1978 | $399.6 billion |
| FY 1977 | $355.6 billion |
| FY 1976 | $298.1 billion |
| FY 1975 | $279.1 billion |
| FY 1974 | $263.2 billion |
| FY 1973 | $230.8 billion |
| FY 1972 | $207.3 billion |
| FY 1971 | $187.1 billion |
| FY 1970 | $192.8 billion |
| FY 1969 | $186.9 billion |
| FY 1968 | $153.0 billion |
| FY 1967 | $148.8 billion |
| FY 1966 | $130.8 billion |
| FY 1965 | $116.8 billion |
| FY 1964 | $112.6 billion |
| FY 1963 | $106.6 billion |
| FY 1962 | $99.7 billion |
Frequently Asked Questions (FAQs)
What is the main source of tax revenue for local governments?
Unlike the federal government, most local governments earn the majority of their revenue from property or sales taxes. Income taxes are less common at the local level, but localities in 11 states collect some portion of their revenue in those ways.
How does the government raise revenue?
One way for the federal government to increase revenue is to boost taxes. It has several options for exactly how to do this, though, and economists and policymakers frequently debate the effectiveness of each. Some examples of ways to increase federal tax revenues include directly increasing tax rates, raising rates on wealthier taxpayers, reducing tax exemptions and deductions, and boosting economic activity.
How much are federal taxes?
Federal income taxes are structured in graduated brackets ranging from 10% to 37% of your adjusted gross income. Long-term capital gains are taxed at a different rate, ranging from 0% to 20%.