Economy articles
US Federal Taxes: How the US Federal Government is Funded
The federal government collected $4.9 trillion in revenue in 2024, 99% of which came from taxes. How much does the average American pay? And who pays the most?
Who doesn’t pay federal income taxes?
In 2022, 31.4% of tax filers paid no federal individual income tax. If deductions and credits reduce a filer’s taxable income to $0, they don’t have to pay federal income tax.
How has TCJA impacted individual income taxes?
The Tax Cuts and Jobs Act (TCJA), which took effect in 2018, changed individual income taxes: lowering tax rates, adjusting tax brackets, nearly doubling the standard deduction, and capping the state and local tax (SALT) deduction. It also made changes to federal corporate taxes. It was one of the biggest tax reform laws in recent years. But the individual tax changes were provisional, and most expire at the end of 2025 unless Congress extends them.TCJA lowered effective tax rates across income groups When TCJA was passed in 2017, the average effective federal individual income tax rate — the percentage of their income most taxpayers pay in taxes — was 14.4%. In 2018, it dropped to 13.0%. By 2022, the average effective federal income tax rate had risen to 14.1%: a 1.1 percentage point increase from 2018, but still below the pre-TCJA rate of 14.4%. This uptick was probably a result of broad economic factors like income growth, employment shifts, and taxpayers moving into higher income brackets, rather than a result of TCJA.
What does it cost the IRS to collect taxes?
The Internal Revenue Service (IRS) spent $16.1 billion to collect $4.7 trillion in taxes in 2023. In other words, it cost the agency 34 cents to collect $100. Collecting trillions of dollars from a population of 336 million people and around 35 million businesses is no small project. The IRS’s staff of 82,990 people collects and evaluates returns, issues refunds, offers taxpayer assistance, oversees tax-exempt organizations, and enforces tax law.How much money does the IRS collect? The IRS is responsible for collecting internal revenue — mostly in the form of taxes — from individuals and businesses across the US. In fiscal year 2023, the agency collected nearly $4.7 trillion, a 26% increase over the previous 10 years. That total included: $4.1 trillion from individual income taxes and other individual payroll contributions $457 billion from corporate income taxes $74 billion from excise taxes $35 billion from estate and gift taxes
How much revenue do states make from marijuana taxes?
Marijuana is the most commonly used federally illegal drug in the United States, with 48.2 million people, or about 18% of Americans, using it at least once in 2019. In states where the drug is legalized, however, cannabis taxes constitute a substantial source of funding for programs ranging from healthcare initiatives to law enforcement.How do states tax retail cannabis sales? The federal government recognizes cannabis as a Schedule 1 substance, meaning it’s considered highly addictive and therefore illegal at the federal level. Despite this, 23 states and Washington, DC, have fully legalized the drug, with an additional 21 states either fully or partially legalizing medical marijuana.Due to the lack of federal recognition over the legality of cannabis, state laws and regulations vary, meaning there’s no single model for revenue collection from medical or recreational dispensaries.As a result, tallying the total revenues generated from cannabis taxes nationwide isn’t currently feasible. However, several states keep consistent records on their taxation of both recreational and medical marijuana, which illustrate how they tax the drug and distribute the revenues.
How much does the average American family pay in taxes?
One of the simplest ways to think about the US standard of living is to consider how much people earn in income, pay in taxes, and receive in government transfers. A government transfer can be cash, or non-cash in the form of services like Medicaid and Medicare.In 2021, the average American family in the middle 20% of income earners paid $17,902 in taxes to federal, state, and local governments. This includes direct taxes, such as income taxes, as well as indirect taxes, like payroll taxes. Of all the taxes the middle 20% paid in 2021, $10,391 went to federal income tax.
Who pays the most income tax?
The federal government generated $4.9 trillion in revenue in fiscal year 2024, nearly half of which came from taxing people on their incomes. Individual income taxes in FY 2024 totaled $2.4 trillion, or $7,166 per person.
'Sin taxes' by state: Where do people pay the most and least in alcohol and tobacco taxes?
Drinking and smoking are two more ways that Americans pay taxes.Every state and Washington, DC, has selective sales taxes on alcohol and tobacco. And like sales tax, alcohol and tobacco taxes are paid by people who buy those items.USAFacts looked at data from the Census Bureau and the Bureau of Economic Analysis to determine where people pay the most in tobacco and alcohol taxes, as a percentage of their per capita personal income in that state. (You can read our full report on Americans’ tax burdens here.)It's important to note that the numbers below are based not just on the excise or sales tax rates in that state, but also on the population size and how much is purchased per person. So, for example, tobacco excise taxes range from 17 cents per pack in Missouri, to $4.35 per pack in Connecticut and New York, according to 2022 CDC data. And alcohol taxes can be either excise taxes (based on volume of alcohol sold at the wholesale level) or sales taxes (on the retail price of alcohol).Where do people pay the most and least in alcohol tax?
How do corporations avoid paying taxes?
In August 2022, President Joe Biden signed the Inflation Reduction Act into law. One of its provisions —a minimum 15% corporate tax — is designed to ensure corporations with $1 billion or more in average annual earnings pay taxes on profits even if they reduce their taxable income. The law took effect in 2023.A corporation’s taxable income is how much money a company makes in a year after subtracting any deductions.Income sources include:Sales revenueInvestment incomeRentCapital gainsDeductions can include:Any business expensesSalaries and wagesDepreciation valueAdvertising costsCharitable contributionsIn some cases, corporations find additional ways to reduce their taxable income. The methods include net operating losses, accelerated depreciation, tax credits, and profit shifting. The Inflation Reduction Act addresses these methods, but only partially.In 2016, the Government Accountability Office found that more than two-thirds of all active corporations had no federal income tax liability, including 42.3% of large corporations.Net operating lossesA corporation has a net operating loss when its business expenses and deductions are greater than its taxable income. Put simply, it’s when a company spends more than it makes. US tax law allows firms to carry over net operating losses from previous years to report lower taxable income for the current year.For example, if a corporation’s taxable income is -$3 million, not only would it not be liable for taxes in the current year, but a portion of that loss could also be carried over to the following year’s tax returns to reduce taxable income.Corporations are limited at carrying over 80% of their net operating losses. This is one of the main rules that allowed 19.5% of profitable businesses to pay no federal income tax in 2012.
How much money does the US federal government collect?
About $5.26 trillion in fiscal year (FY) 2025. This is about $15,400 per person in the US, however individual contributions vary based on income, spending, and other factors. Government revenue is the total amount of money received from individual and corporate taxes, and other sources that are used to pay for government spending.
Just the Facts about the US economy
How does the government measure the economy? By tracking GDP, unemployment numbers, and the prices people pay for goods and services.
Where do people pay the most and least in property taxes?
If you enjoy checking out books from the library, have a child that goes to public school, or feel confident relying on your local fire department or sewer system (among many other services), you are using services that are often partially funded by property taxes.Property taxes are levied on real property, such as homes, commercial buildings, and land, as well as personal property, which can include cars, bank accounts, and stocks and bonds. All states and Washington, DC, collect property taxes.The amount of property tax a person owes, or the property tax rate, depends on the property’s value. And in the US, property tax rates also vary by state, county, and municipality.Using data from the Census Bureau and the Bureau of Economic Analysis, USAFacts examined Americans’ property tax burdens — the proportion of their personal income paid in state and local property taxes. (See the full report on US tax burdens here.)
Improving the timeliness, accessibility, and usefulness of tax data
Each year, the Statistics of Income (SOI) Division of the Internal Revenue Service (IRS) publishes statistics on a range of tax topics, including tax rates, tax credits and deductions, corporate taxes, income, and more. By collecting over 160 million individual income tax returns each year in addition to corporate tax returns, W-2s for wage and salary workers, 1099s for self-employment income, 990s from nonprofits, and various other tax forms, the IRS sits on one of the richest sources of data in the United States. However, SOI’s data products are challenging to navigate and can be delayed multiple years. Additionally, SOI does not publish key data that the IRS collects.
How did the Inflation Reduction Act of 2022 change corporate taxes?
The Inflation Reduction Act, signed by President Joe Biden on Aug. 16, 2022, changed the way large corporations are taxed. The law imposed a minimum 15% tax on corporations that made $1 billion in average annual earnings over the past three years.Corporations report income in two different ways: book income and taxable income. The 15% minimum tax applies to book income with some adjustments.The minimum book tax's objective is to ensure that businesses pay taxes when making a profit. The tax took effect in 2023. The Joint Committee on Taxation estimated that about 150 corporations would be subject to the minimum tax each year, and that it will result in a gain of $222 billion over 10 years.A Congressional Research Service report estimated that about half the tax revenue would be collected from manufacturing companies (with about 16% from chemical manufacturing) and about 11% each from information and holding companies.
How much revenue does the federal government collect from tariffs?
$194.9 billion in FY 2025. This figure reflects revenue from tariffs and other import-related fees, also known as customs duties. Customs duties are taxes and fees paid by US importers and collected by US Customs and Border Protection on goods imported into the country, which generate revenue for the federal government.
How much revenue does sports betting generate?
Betting isn't something that only happens at racetracks or casinos anymore – websites and apps are helping sports betting become a nationwide pastime. And as it grows in popularity, some state coffers are benefiting to the tune of millions in tax revenue from wagers on professional sports.What is sports betting?“Sports gambling” is defined in federal law as “a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.” Basically: placing bets on the outcomes of sporting events or on the performance of particular athletes. Sports betting can happen in person (such as at a casino or sportsbook/off-track), online at websites like FanDuel, and through smartphone apps.Is sports betting legal?Sports betting is not federally prohibited in the United States; its legality depends on individual state laws. State-by-state legality was not always the case: sports betting was effectively banned nationwide in 1992 under the Professional and Amateur Sports Protection Act (PASPA). That law prohibited states from authorizing sports betting, although gambling was allowed to continue in four states that had state-authorized sports betting schemes in place pre-PASPA: Nevada, where all sports betting was already legal and regulated. Delaware, Oregon, and Montana, which were permitted to continue the limited forms of sports betting they already allowed — primarily state-run sports lotteries or parlay-style betting — but weren’t allowed to expand beyond those formats.
How much does the US federal government spend?
About $7.05 trillion in fiscal year (FY) 2025. This averages about $20,600 per person in the US. The amount the government can spend depends on the amount of revenue it collects (e.g., through taxes, customs duties, and other sources). If it has to spend more revenue than it brings in, it borrows the funds, creating debt.
What does the Department of the Treasury (TREAS) do?
The Department of the Treasury (Department of Treasury, TREAS) is a cabinet-level executive branch agency responsible for overseeing economic conditions and ensuring the financial security of the United States. The department's functions include advising the president on economic matters, managing federal finances, collecting taxes through the Internal Revenue Service, producing currency, and supervising national banks. It was established in 1789 and is the second-oldest department in the federal government.
What is the federal government's budget deficit?
About $1.83 trillion deficit in fiscal year (FY) 2024. A budget deficit occurs when the federal government spends more money than it brings in through taxes, customs duties, the sale of assets, and other revenues. When the government has a deficit, it borrows money by selling bonds and other securities in order to pay for it, adding to the national debt. A budget surplus, on the other hand, occurs when the government brings in more money than it spends.
How much debt does the US have?
About $38.5 trillion as of January 2026. The federal government borrows money when its spending and investments cannot be funded by federal revenue alone; this debt enables the government to pay for programs and services when funds aren’t immediately available.
What does the Department of Transportation (DOT) do?
The Department of Transportation (USDOT, DOT) is a cabinet-level executive branch agency responsible for overseeing national transportation systems and infrastructure. Its functions include developing and implementing federal transportation policies; ensuring the safety and efficiency of highways, railroads, air travel, and maritime transport; and administering funding for transportation projects including local transit systems. It was established in 1966.
What are capital gains? How are they taxed?
Most Americans are taxed on the income they earn through work. Those taxes are based on how much someone earns, with higher tax rates charged to higher amounts of income.But taxes on investments aren’t handled the same way. The money someone makes from selling a house, a stock, or some other investment is called a capital gain. The tax rates for capital gains are different depending on how long the investment was owned, the amount of investment income received, and how much the taxpayer makes in annual income.Over the years, Congress has made several changes to how capital gains are taxed, from the tax rates themselves to what gets counted as a capital gain.What are capital gains?A capital gain or loss is the difference between the price paid for an asset and the price it was sold at. If you sell an asset for more than you paid for it, it becomes a capital gain. If the asset is sold for less than what was paid for it, then it is a capital loss. Assets can include homes, stocks, bonds, and other investments.A capital gain or loss is classified as short- or long-term. If someone sells an asset after owning it for a year or less, it is a short-term capital gain or loss. If the asset is sold after it’s been owned for more than a year, it is considered a long-term gain or loss.According to the Congressional Research Service, about two-thirds of individual capital gains subject to tax are from selling corporate stock; the remainder is from property sales.How are capital gains taxed?Capital gains are taxed depending on the net capital gain in a year. The Internal Revenue Service (IRS) defines net capital gain as the difference between a taxpayer’s total long-term capital gains and total short-term capital losses.
US trading partners, imports and exports, and how tariffs factor in
In 2024, the US imported $4.1 trillion and exported $3.2 trillion in goods and services. Higher tariffs can raise prices and the impact on US jobs is a complex issue. Join Steve as he talks through US trade, tariffs and their impact, US trade partners, trade agreements, and more.
Which states contribute the most and least to federal revenue?
In FY 2024, the federal government collected around $5.07 trillion from states and their residents through taxes on individuals and businesses and redistributed about $4.87 trillion back to states and residents through programs like Social Security, Medicaid, Medicare, food stamps, and education grants. The balance varies by state: Californians paid about $275.6 billion more to the federal government than they received, while Virginians received about $89.0 billion more than they paid.
How much does it cost to own a car?
In 2023, the annual cost of owning a car was approximately $12,182 for 15,000 miles of driving. This total encompasses both fixed costs such as insurance, registration, taxes, depreciation, and finance charges, and variable costs such as fuel, maintenance, and tires.What are the costs of owning a car?Owning and operating a car involves both fixed and variable costs. Fixed costs, also known as ownership costs, do not change based on how much you drive and include insurance, license, registration, taxes, depreciation, and finance charges. Variable costs, also known as operating costs, involve the physical aspects of vehicle operation and include gasoline, maintenance, and tires.
Which states have the highest and lowest income tax?
The average American paid $1,613 in state income taxes in 2022. Depending on which state you live in, you might be paying more, less, or nothing at all. What is state income tax? States collected state income taxes from residents annually. These are separate from federal income taxes, which are paid to the federal government. States commonly use income tax revenue to fund services and programs for: Education: supporting K–12 (teacher and administrator salaries) and higher education (state community colleges and universities) Healthcare: operating state-specific initiatives and state-administered programs like Medicaid Corrections: building, maintaining, and operating state prison systems Transportation and infrastructure: building and maintaining roadways, bridges, airports, and public transit systems Public assistance: providing cash or benefits to individuals or families, including childcare services, transitional housing, and job training
What causes high gas prices?
Drivers in the United States know that the price of gasoline is almost constantly changing. But what’s the cause of this unpredictability? The factors can be as local as the nearest gas station and as global as decisions made halfway around the world.What goes into gas prices?The retail price of gas depends on four factors: the cost of crude oil, refining costs and profits, distribution and marketing costs and profits, and taxes, according to the US Energy Information Administration (EIA). Of these, the price of crude oil is the single biggest contributor to the retail price of gasoline.
How much money does the government collect per person?
The US collected $5.03 trillion in federal revenues in 2022, up $630 billion from the previous year, after adjusting for inflation.That equates to $15,098 collected per person, up 14% from 2021. Most revenues came from individual income tax, at $7,898 per person on average, and payroll taxes, at $4,510 per person on average.Using data from the State of the Union in Numbers, this chart visualizes how revenues have grown over the past two years.
What are tariffs and how do they work?
What is a tariff?Tariffs, sometimes called duties or customs duties, are taxes on goods that are traded between nations. When goods cross the US border, Customs and Border Protection (CBP) collects tariffs based on the type of goods, their quantity, and which country they’re coming from.Why do countries use tariffs? Tariffs are a way for countries to control international trade. By artificially raising the cost of importing goods, tariffs can incentivize would-be importers to instead purchase goods from domestic sellers, potentially strengthening the local economy. Politics can also play a role: governments can adjust tariffs to exert economic leverage over political rivals or retaliate against other tariffs or economic sanctions. Tariffs also generate revenue for importing countries, though in developed countries and in today’s global economy, they tend to be used more to achieve foreign policy goals than financial ones.
How long do people wait for subsidized housing in the United States?
Two years and three months, on average, in 2024. That’s an 8% increase since 2023, when recipients spent two years and one month on waiting lists before moving in to subsidized housing.
What is the Consumer Price Index, and what does it mean for the economy?
Rising inflation can have a direct impact on the lives of Americans. It means increases in prices at grocery stores, gas stations, and retail shops, making it harder to afford their daily necessities, particularly if wage increases don’t keep up.Inflation is a phenomenon that can be reported using various measures, the most common of which is the rate of change in a measure called the Consumer Price Index (CPI).What does the CPI measure?The CPI, produced by the Bureau of Labor Statistics (BLS), measures changes in the prices paid by urban consumers (who are over 90% of the population) for a particular group of goods and services. The CPI looks specifically at the prices of apparel, education and communications, food and beverages, housing, medical care, recreation, transportation and other items in over 200 categories.What is the difference between CPI and inflation?The CPI is reported monthly alongside the “inflation rate,” which, though reported monthly, is a measure of percentage change in the CPI in the last year.
How much debt does the average person in the US owe?
Around $63,300 as of the third quarter of 2025. Compared to the previous quarter (April through June 2025), the average adult owed $136 less after adjusting for inflation, reflecting slight shifts in household borrowing patterns. This debt, often referred to as “household debt,” represents the total amount owed by individuals for obligations such as mortgages, student loans, credit cards, and auto loans.
What does the US produce?
In 2024, the US produced $29.2 trillion in goods and services. This is the total of what each industry and government sector contribute to the economy, and it’s called value added. Value added is calculated by subtracting production costs (materials, services, work pay, taxes) from the value of the goods and services created. It makes up the gross domestic product (GDP), the standard measure of a country’s economy. What goods and services does the US produce?Over four-fifths (83.3%) of value added to the US economy in 2024 was via services, for a total of $24.3 trillion. Services include housing and utilities, transportation, financial services and insurance, healthcare, recreation, food services and accommodations, and others.
Where do people pay the most and least in sales tax?
The last time you picked up groceries or bought new clothes, you probably had to pay a sales tax. General sales taxes, which apply to most goods and services, are one of the biggest sources of tax revenue for state and local governments. These sales taxes made up 32.2% of state and local government tax revenue in 2020.To understand how these and other taxes impact Americans, USAFacts examined tax burdens across the country, looking at the proportion of a person’s income that is paid in taxes. Tax burdens can be measured in two ways: as a percentage of personal income, which is calculated by dividing the per capita tax revenue by the per capita annual income for each state, and as the per-person tax revenue.(There are also selective sales taxes, which target specific items like alcohol, tobacco, and gasoline. Learn more about how much Americans spend on alcohol and tobacco taxes here.)
Americans aren't saving as much as they used to
Americans saved an average of 4.6% of their disposable income in 2024. So far in 2025, that average is lower: 4.4%.In fact, the average personal saving rate today is lower than it was in the 2010s — and even the 1960s.What is the personal saving rate?The Bureau of Economic Analysis (BEA) defines the personal saving rate as how much money American households put away — in a checking or savings account, an individual retirement account, or an employer-sponsored 401(k), to name a few — after paying expenses and taxes. The personal savings rate only measures cash saved and doesn’t include capital gains like an increase in value of a house. The BEA, a division of the Department of Commerce, measures and tracks this rate monthly. How has the personal saving rate changed over time?The personal saving rate in the 1960s and 1970s averaged 11.7%, peaking at 17.3% in May 1975. It’s gradually declined since then, reaching an all-time low of 1.4% in July 2005.
The State and Local Tax (SALT) deduction cap: explained
When filing taxes, Americans can claim a standard deduction or itemize certain expenses to lessen their taxable income. The standard deduction is a fixed amount that differs depending on whether someone is filing as an individual or as a married couple. The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction until the end of 2025.The act also capped the amount of state and local taxes that filers could use in itemized deductions at $10,000. The 117th Congress is currently debating whether this state and local tax deduction cap should be repealed or increased. Here’s how Americans are using this deduction.What is the State and Local Tax (SALT) deduction?This limit on state and local tax is often abbreviated to the SALT deduction cap and was temporarily set at $10,000 for single and married filers and $5,000 for married couples filing separately. Income taxes, sales taxes, personal property taxes, and certain real property taxes are eligible for the SALT deduction.
What is the “tampon tax”?
About a quarter of the US population are women in the 15 to 49 age group. And while not everyone in the group needs menstrual products, it’s an essential part of life for many.Menstrual products are an unavoidable cost for those who need them. So anything that makes menstrual products cost more can place an additional burden on those with lower incomes.Congress and some state governments took action to alleviate some of those costs in recent years.Starting in 2020, the federal government considers menstrual products as a qualified medical expense. And since 2016, twenty-three states exempted these products from state sales taxes, eliminating the so-called “tampon-tax." The “tampon tax” refers to sales tax applied to tampons, pads, and other menstrual products. Five other states have no sales tax at all, so the products are naturally exempt.
Minimum wage in America: How many people are earning $7.25 an hour?
Although the federal minimum wage is $7.25 an hour, the minimum an employer must pay depends on the state in which the employee resides. Many states have mandated minimum wages that are different from the federal minimum
How do marijuana laws differ between states?
While marijuana remains illegal at the federal level per the 1970 Controlled Substances Act (CSA), the US has become a patchwork of state-determined laws pertaining to the drug. Some states have legalized recreational marijuana, others allow medicinal use and/or CBD oil. A few states have decriminalized the plant, and a handful follow the federal guidelines. What does marijuana legalization mean?In the United States, marijuana legalization refers to the process of making marijuana use, possession, and sales legal under certain conditions. Adults in states that legalize the drug can use it for both medical and recreational purposes, following state laws. Legalization allows for regulated sales of products that contain cannabidiol (CBD) and delta-9-tetrahydrocannabinol (THC). Medical cannabis laws also fall under this category, permitting patients with conditions such as chronic pain, multiple sclerosis, insomnia, and depression to use the substances for treatment. Since marijuana remains federally classified as an illegal drug, state legalization has many implications on federal income taxes filed by dispensaries, as well as the cross-border sale and transportation of cannabis products.
State tax revenue was down 4.4% in the first nine months of 2020
Like many businesses in the COVID-19 pandemic, states took a significant hit to incomes in 2020. In the second quarter of 2020 — or April through June — state tax collections dropped 29% compared to the same quarter in 2019. One reason for this is that many states, along with the federal government, shifted their income tax filing deadlines from spring to summer of 2020 — or from the second to third quarter — in response to the pandemic. But not all second quarter losses were due to the income tax delay: states also experienced declines in revenue from sources like sales and gas taxes as a result of social distancing and lockdowns.Data from the third quarter — July through September — shows state tax collections rebounded compared to the second quarter, in part because some states collected that delayed income tax revenue. But during the first three quarters of 2020 combined, total state tax revenue was still down 4.4% compared to the same period in 2019.