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US Government Revenue
in Recent Decades

Government revenue was badly hit in recent recessions.

Revenue Steadily Increasing

Government revenue in the United States steadily increased from $1.3 trillion in the mid 1980s to $3.7 trillion in 2000. But its steady increase was impacted in the recession of 2000-01 and the Great Recession of 2008-09.

Chart 3.11: Government Revenue in dollars

Government revenue amounted to $1.3 trillion in the mid 1980s, and then breached $2 trillion in 1992 just after the recession of 1990-91. In the 1990s revenue increases accelerated, reaching $3.2 trillion in 1998 and reaching a peak of $3.7 trillion in 2000. But in the 2000s, with the dot-com crash and 9/11, government revenue declined hitting $3.3 trillion in 2002 before resuming its increase again. Revenue reached above $4 trillion in 2005 and $5 trillion in 2007. Then came the Crash of 2008 and government revenue nose-dived down to $3.6 trillion in 2009. After a few years of catch-up, revenue is expected to breach $6 trillion in 2015.

Chart 3.12: Government Revenue as Percent of GDP

Viewed as a percent of Gross Domestic Product (GDP) government revenue in recent years has fluctuated. Starting at 31 percent of GDP in 1985, revenue increased slightly to 32 percent of GDP through the mid 1990s. Then revenue began an increase in the boom of the late 1990s, reaching 35.7 percent of GDP in 2000. Revenue retreated to 30 percent of GDP in the trough of the 2000-01 recession, before increasing back to 35.7 percent of GDP at the business cycle peak in 2007.

In the Crash of 2008 government revenue decreased sharply. Revenue declined to 25 percent of GDP in 2009. But revenue is expected to recover to about 33 percent of GDP in the next few years.

Recent Revenue by Government Level

Federal revenue as a percent of GDP has shown a decline in recent decades. But state and local revenues have increased.

Chart 3.13: Government Revenue by Level

Federal revenue stood at 16.9 percent of GDP in 1985. State government revenue was 8.0 percent of GDP and local revenue was 6.1 percent of GDP. By the year 2000 federal revenue had increased to 19.7 percent of GDP, but state revenue had increased to 9.6 percent of GDP and local revenue had increased to 6.5 percent of GDP.

In the 2000-01 recession federal revenue decreased to 16.9 percent of GDP by 2002, state revenue had decreased sharply to 6.9 percent of GDP and local revenue had decreased modestly to 6.2 percent of GDP. In the recovery, federal revenue increased to 17.7 percent of GDP by 2007, state revenue had increased sharply to 10.8 percent of GDP and local government revenue had increased modestly to 7.1 percent of GDP.

Chart Key:
- Local direct revenue
- State direct revenue
- Federal direct revenue

Then came the Crash of 2008. In 2009 federal revenue dropped to 14.5 percent of GDP, state revenue collapsed to 4.4 percent of GDP (including $0.5 trillion in employee pension fund losses) and local revenue decreased to 6.4 percent of GDP. By 2015, federal revenue is projected to increase to 18.3 percent of GDP, state revenue to 9.3 percent of GDP and local revenue to 6.3 percent of GDP.

Revenue by Type

Income tax revenue fluctuates; ad-valorem taxes do not.

Chart 3.14: Total Recent Revenue by Type

In 1992 income taxes at all levels of government collected 11.3 percent of GDP; social insurance taxes collected 7.4 percent of GDP. Ad-valorem taxes, such as sales and property taxes, collected 7.9 percent of GDP. Fees and charges totalled 2.2 percent of GDP and business revenue totaled 4.4 percent of GDP.

At the top of the business cycle in 2000, income taxes collected 14.8 percent of GDP, social insurance taxes collected 7.2 percent of GDP and ad-valorem taxes collected 7.6 percent of GDP. Fees and charges totalled 2.3 percent of GDP and business revenue totalled 5.3 percent of GDP.

Chart Key:
- Social insurance taxes
- Business revenue
- Fees & charges
- Ad-valorem taxes
- Income taxes

At the top of the business cycle in 2007, income taxes collected 13.5 percent of GDP and social insurance taxes amounted to 6.9 percent of GDP. Ad-valorem taxes totalled 7.6 percent of GDP. Fees and charges totalled 2.5 percent of GDP and business revenue totalled 6.5 percent of GDP. Two years later in the depths of the Great Recession income taxes had declined to 9.8 percent of GDP and social insurance taxes had increased to 7.1 percent of GDP. Ad-valorem taxes were almost unchanged at 7.7 percent of GDP. Fees and charges increased to 2.8 percent of GDP and business and other revenues had gone negative to -1.4 percent of GDP, primarily due to $0.5 trillion in losses on government employee pension plans.

By the mid 2015 income taxes are expected to increase their take to 13.4 percent of GDP, and social insurance taxes will be about 8.5 percent of GDP. Ad-valorem taxes are expected at 7.0 percent of GDP, fees and charges will be 2.5 percent of GDP and business revenue will be 2.5 percent of GDP.

Revenue Breakdown by Level of Government

The federal government raises revenue principally from income and social insurance taxes. State government revenue breaks down about equally between income taxes, ad-valorem taxes, and fees and business revenue. Local government revenue is about half ad-valorem taxes and half fees and business revenue.

Chart 3.15: Federal Revenue in Recent Decades

In the last 25 years, since the 1990s, federal revenue has come principally from income taxes, individual and corporate. Individual income tax in 1985 yielded 7.7 percent of GDP and the corporate income tax yielded 1.4 percent of GDP.

By the top of the late 1990s boom the individual income tax was yielding 9.7 percent of GDP and the corporate income tax was collecting 2.0 percent of GDP. But by the end of the 2000-01 recession in 2004 the individual income tax had collapsed to 6.9 percent of GDP and the corporate income tax take was cut almost in half to 1.1 percent of GDP.

Federal Chart Key:
- Business revenue
- Corporate Income Tax
- Individual Income Tax
- Ad-valorem Tax
- Social Insurance Tax

At the top of the mid 2000s boom the individual income tax collections had increased in 2007 to 8.0 percent of GDP and the corporate income tax had increased to 2.6 percent of GDP. In 2010 in the depths of the Great Recession the individual income tax collected 6.0 percent of GDP and the corporate income tax collected 1.3 percent of GDP.

The next largest tax source for the federal government comes from social insurance taxes like the FICA tax on wages. It fluctuates much less than the income tax. In 1985 social insurance taxes collected 6.1 percent of GDP and had increased modestly to 6.4 percent of GDP just before the 1990-91 recession. In the 1990s boom social insurance taxes collected between 6.2 and 6.4 percent of GDP. In the 2000s social insurance taxes started out in 2001 at 6.5 percent of GDP then declined to 5.8 percent of GDP in 2010. Social insurance tax collections dropped to 5.2 percent in 2012 when the federal government cut the FICA tax rate for two years. Social insurance tax collections are expected to increase back to 5.8 percent of GDP by 2015.

Other federal revenue sources amount to about 1 percent of GDP.

As the chart shows, the yield from income taxes fluctuates with the economy, and the fluctuation has been getting worse with the dot-com recession of 2001-02 and the Great Recession of 2007-09.

Chart 3.16: State Revenue in Recent Decades

State revenues in the last quarter century have come principally from three sources: income taxes, ad-valorem taxes such as property and sales taxes, and social insurance taxes. Income taxes collect about 2 percent of GDP, Ad-valorem taxes yield about 3 percent of GDP, and fees and charges have increased from 0.8 percent of GDP in 1992 to 1.1 in 2010.

State and Local Chart Key:
- Social Insurance Taxes
- Business revenue
- Fees and charges
- Ad-valorem Tax
- Income Taxes

As the chart shows, the revenue from social insurance taxes fluctuates with the economy. This is primarily driven by gains and losses in state employee pension funds. In a good year, social insurance taxes exceed percent of GDP. In 2009, after the Crash of 2008, social insurance revenue was -2.7 percent of GDP.

Chart 3.17: Local Revenue in Recent Decades

Local revenues have remained principally ad-valorem taxes, ranging from 3 to 3.7 percent of GDP. Income taxes remain negligible in most localities. Fees and charges range from 1.3 to 1.6 percent of GDP. Business income, such as utilities and transit agencies, account for revenues ranging from 1.1 to 1.8 percent of GDP. Social insurance revenue, principally from employee retirement funds, fluctuates.

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Revenue Data Sources

Revenue data is from official government sources.
  Federal data since 1962 comes from the president’s budget.
  All other revenue data comes from the US Census Bureau.

Gross Domestic Product data comes from US Bureau of Economic Analysis and

Detailed table of revenue data sources here.

Federal revenue data begins in 1792.

State and local revenue data begins in 1890.

State and local revenue data for individual states begins in 1957.

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Next Data Update

> State Finances FY13

> data update schedule.

Data Sources for 2015:

GDP, GO: See GDP, GO Sources
Federal: Fed. Budget: Hist. Tables 2.1, 2.4, 2.5, 7.1
State and Local: State and Local Gov. Finances
Guesstimated” by projecting the latest change in reported revenue forward to future years

> data sources for other years
> data update schedule.

Federal Deficit Announced for FY14

On October 13, 2014, the US Treasury reported in its Monthly Treasury Statement for September that the federal deficit for FY14 ending September 30 was $483 billion. Here are the numbers, including total receipts, total outlays, and deficit compared with the numbers projected in the FY 15 federal budget published in February 2014:

Federal Finances
FY14 Outcomes
Receipts $3,002$3,021
Deficit$649$483 now shows the new numbers for total FY14 outlays and receipts on its Estimate vs. Actual page.

The Monthly Treasury Statement includes "Table 9. Summary of Receipts by Source, and Outlays by Function of the U.S. Government, September 2014 and Other Periods".   This table of outlays by function makes it possible for to estimate outlays by "subfunction" for FY2014 by factoring budgeted amounts by the difference between budgeted and actual "function" amounts where actual outlays by subfunction cannot be gleaned from the Monthly Treasury Statement.

Final detailed FY2014 numbers will not appear until the FY2016 federal budget is published in February 2015

Tax links

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