Where Does the Federal Government Get All That Money?

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Dec 22, 2017

Did you know that the U.S. federal government collects more than $3 trillion in taxes each year? Where does all that money come from? Find out in this short video.

This video is part of a collaborative business and economics project with Job Creators Network and Information Station. To learn more, visit informationstation.org.

The US federal government collects over $3 trillion in taxes every year, about half of which comes from individuals and small businesses. 

  • The US government brought in $3.654 trillion in 2017.View Source
  • About half (47%) of the government’s revenue comes from individual income tax payers.View Source
  • Individual income tax has been the largest source of government revenue since 1950.View Source
  • Related video: “How to Solve America’s Spending Problem”View Source

Heavy taxation and overregulation hit small businesses the hardest. Many small businesses pay twice as much in taxes as large corporations.

  • Many small businesses must pay twice as much as large corporations in federal taxes.View Source
  • If a business is a sole proprietorship, they pay the individual income tax rate.View Source
  • A majority of small businesses are set up as “pass-through” entities, which means that business profits are included on the owner’s individual tax sheet.View Source
  • Tax compliance costs are two-thirds larger for small businesses than for big businesses.View Source
  • Related video: “Taxes are Killing Small Businesses”View Source

Paying federal income taxes costs Americans more than just all that money paid to the government. It costs 2.6 billion man-hours a year. 

  • Americans spend a combined 2.6 billion man-hours every year filling out tax returns. That’s an average of 17 hours per American tax filer.View Source
  • In 2012, 169 million returns were filed and cost Americans over $20 billion in compliance costs.View Source
  • In 2013, the US tax code surpassed 70,000 pages.View Source
  • Related video: “The Case For A Flat Tax”View Source

Do the rich pay their fair share? The top 1% of taxpayers pay around 40% of all federal income taxes. The bottom 50% pay around 3%.  

  • According to the most recent data from the Tax Foundation, the top one percent of taxpayers contribute roughly 40% of all federal income taxes collected. The bottom 50% of taxpayers were responsible for less than three percent.View Source
  • According to 2016 data from the Tax Policy Center, 44% of Americans — or roughly 77 million people — don’t pay any federal income taxes at all.View Source
  • The top one percent pay around 23% of their income in taxes, higher than any income group below them.View Source
  • Related video: “The Progressive Income Tax: A Tale of Three Brothers”View Source
  • Related video: “Do the Rich Pay Their Fair Share?”View Source

Both parties should be able to get behind small business tax cuts that accelerate job creation, raise wages, and strengthen communities.

  • Progressive “pro-worker” solutions, such as minimum wage increases, actually increase unemployment, hurting businesses and workers.View Source
  • Tax cuts for small businesses bring money back to main street, allowing growth, higher wages, and more jobs.View Source
  • The tax code favors large businesses, who already have more resources, over small businesses, costing them as much as $19 billion per year in tax compliance costs.View Source
  • Related video: “Lower Taxes, Higher Revenue”View Source

Tax compliance costs are two-thirds larger for small businesses than for big businesses.

  • Tax compliance costs are two-thirds larger for small businesses than for big businesses.View Source
  • Many small businesses must pay twice as much as large corporations in federal taxes.View Source
  • The tax code should benefit all Americans not just the biggest companies.View Source
  • Related video: “Taxes are Killing Small Businesses”View Source

The average American devotes 17 hours a year to filling out their tax returns. Overly complex tax codes cost us both money and time.

  • Americans spend a combined 2.6 billion man-hours every year filling out tax returns. That’s an average of 17 hours per American tax filer.View Source
  • In 2012, 169 million returns were filed and cost Americans over $20 billion in compliance costs.View Source
  • In 2013, the US tax code surpassed 70,000 pages.View Source
  • Related video: “The Case For A Flat Tax”View Source

Every year the U.S. federal government collects more than $3 trillion in taxes, and almost half of that comes from you and me, the individual income taxpayers. These are the taxes that come out of your paycheck or maybe you pay quarterly. Either way—it’s a lot of money, so it’s worth learning more about! So here are five things you didn’t know about the individual income tax:

Number one: The individual income tax has been the largest source of federal government revenue since 1950—accounting for 47.3 percent of revenue in 2016.

Number two: While the name “individual income tax” implies that only individual Americans pay the tax, many small businesses are subject to it as well. A majority of small businesses are set up as “pass-through” entities, which means that business profits are included on the owner’s individual tax sheet and is thus taxed at the individual rate which is higher than the rates big corporations pay.

Number three: According to 2016 data from the Tax Policy Center, 44 percent of Americans —or roughly 77 million people— don’t pay any federal income taxes at all.

Number four: A combined 2.6 billion man hours is spent every year filling out tax returns. That’s an average of 17 hours per American tax filer. If time really does equal money, we’re paying even more than we thought to Uncle Sam.

And lastly number five: According to the most recent data from the Tax Foundation, the top one percent of taxpayers contribute roughly 40 percent of all federal income taxes collected. And the bottom 50 percent of taxpayers were responsible for less than three percent. That’s a lot of taxes paid by very few people.

The individual income tax is what makes many of the benefits and programs provided by the federal government possible, but having the rate set too high can have serious consequences on the financial situation of individuals and their families, as well as overall economic growth.

Small business tax cuts is not a partisan issue, it’s an American issue. Both Republicans and Democrats should be able to get behind legislation that accelerates job creation, raises wages, and strengthens communities. It’s a win-win policy.

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