Where does the government get its money? | Institute for Fiscal Studies (2024)

FAQs

Where does the government get their money from? ›

The federal government collects revenue from a variety of sources, including individual income taxes, payroll taxes, corporate income taxes, and excise taxes. It also collects revenue from services like admission to national parks and customs duties.

The primary sources of revenue for the U.S. government are individual and corporate taxes, and taxes that are dedicated to funding Social Security and Medicare.

Over half of federal revenue comes from individual income taxes, 9 percent from corporate income taxes, and another 30 percent from payroll taxes that fund social insurance programs (figure 1). The rest comes from a mix of sources.

Sources of Federal Revenues

Individual income taxes are the largest single source of federal revenues, constituting nearly one-half of all receipts.

Governments generate revenue by collecting income taxes, payroll taxes, sales taxes, property taxes, and social insurance taxes. Revenue is also generated from income on assets and transfer receipts from businesses and individuals.

The fact is that Congress, despite borrowing $2.9 trillion from Social Security, hasn't pilfered or misappropriated a red cent from the program. Regardless of whether Social Security was presented as a unified budget under Lyndon B.

High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.

Sales and income tax make up the lion's share of state tax revenue, accounting for 89.5% of all taxes collected at the state level.

The $34 trillion gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself. Learn more about different ways to measure our national debt.

Corporate Income Taxes

It's the third largest source of revenue.

Who controls the federal budget? ›

Every year, Congress decides the amount and the type of discretionary spending, as well as provides resources for mandatory spending.

Nearly half of mandatory spending in 2022 was for Social Security and other income support programs such as the Child Tax Credit, food and nutrition assistance, and federal employee benefits (figure 3). Most of the remainder paid for the two major government health programs, Medicare and Medicaid.

One way tax-free countries can make money is with customs and import duties. By imposing tariffs (which are often very hefty) on imported goods, they're able to supplement the income they would otherwise have gotten from taxing their citizens and the companies that do business within their borders.

Combining direct and indirect taxes, as well as taxes from state and local government, the average American family paid $17,902 in taxes in 2021.

Positive amounts represent budget deficits or the amount by which total government spending exceeds total revenues during a specified period. Today, 43 cents of every dollar spent is borrowed; this amount is about 4 times the rate in 1980.

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.

Issue Summary. The federal government awards hundreds of billions of dollars in grants to state and local governments each year. These grants help finance a broad range of services, including health care, education, social services, infrastructure, and public safety.