U.S. federal tax revenue comprises the total tax receipts received by the federal government each year. Most of it is paid either through income taxes or payroll taxes. In fiscal year (FY) 2021, income taxes will account for 50%, payroll taxes make up 36%, and corporate taxes supply 7%. 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 2021 federal revenues aren't enough to pay for spending. That creates a $966 billion budget deficit.
- Tax cuts implemented by Presidents Bush, Obama, and Trump to drive economic growth further reduced revenues.
Current Revenue
The U.S. government's total revenue is estimated to be $3.863 trillion for FY 2021.
Income taxes will contribute $1.932 trillion. Another $1.373 trillion will come from payroll taxes. This includes $1.011 trillion for Social Security, $308 billion for Medicare, and $43 billion for unemployment insurance. Corporate taxes will add another $284 billion. The Tax Cut and Jobs Act cut taxes for corporations much more than it did for individuals. In 2015, corporations paid 11%, and income taxpayers paid 47%.
The Federal Reserve, whose revenue comes from a variety of sources, contributes $71 billion. 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. In addition, the Fed owns $4 trillion in U.S. Treasury securities that it acquired through quantitative easing.
The remainder of federal revenue comes from excise taxes ($87 billion), tariffs on imports ($54 billion), estates taxes ($22 billion), and miscellaneous receipts ($40 billion).
How Revenue Relates to the Deficit, Debt, and GDP
The government’s annual income doesn’t cover its spending, which creates a $966 billion budget deficit. Many argue that Congress should only spend what it earns, but that depends on where the economy is in the business cycle. Congress should use deficit spending to boost 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. Current revenue collected equals 16.5% of gross domestic product, which is a nation’s measurement of economic output.
When that much production is going to the federal government, it’s best to reinvest it into the economy to support future growth.
Revenues were also lowered by the extension of the Bush tax cuts and the Obama tax cuts, which fought the 2001 recession and the 2008 recession, respectively, by spurring the consumer spending that drives almost 70% of economic growth.
U.S. Tax Revenue by Year
Here's a record of income for each fiscal year since 1789. Tax receipts fell off during the recession but started setting new records by FY 2013.
| Fiscal Year | Revenue |
|---|---|
| FY 2021 | $3.86 (estimated) |
| FY 2020 | $3.71 trillion (estimated) |
| FY 2019 | $3.46 trillion (actual) |
| 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 | $2.77 trillion |
| FY 2012 | $2.45 trillion |
| FY 2011 | $2.30 trillion |
| FY 2010 | $2.16 trillion |
| FY 2009 | $2.10 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 | $1.82 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 | $1.05 trillion |
| FY 1990 | $1.03 trillion |
| FY 1989 | $991 billion |
| FY1988 | $909 billion |
| FY 1987 | $854 billion |
| FY 1986 | $769 billion |
| FY 1985 | $734 billion |
| FY 1984 | $666 billion |
| FY 1983 | $601 billion |
| FY 1982 | $618 billion |
| FY 1981 | $599 billion |
| FY 1980 | $517 billion |
| FY 1979 | $463 billion |
| FY 1978 | $399 billion |
| FY 1977 | $356 billion |
| FY 1976 | $298 billion |
| FY 1975 | $279 billion |
| FY 1974 | $263 billion |
| FY 1973 | $231 billion |
| FY 1972 | $207 billion |
| FY 1971 | $187 billion |
| FY 1970 | $193 billion |
| FY 1969 | $187 billion |
| FY 1968 | $153 billion |
| FY 1967 | $149 billion |
| FY 1966 | $131 billion |
| FY 1965 | $117 billion |
| FY 1964 | $113 billion |
| FY 1963 | $107 billion |
| FY 1962 | $100 billion |
| FY 1961 | $94 billion |
| FY 1960 | $93 billion |
| FY 1789–1959 | $1.1 trillion |
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?
The primary 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%.