Tuesday November 28, 2023
Income Tax Revenue Up 29%
Total tax receipts for the federal government were $4.9 trillion, as estimated by the Congressional Budget Office (CBO). This was 21% greater than federal year 2021. This is the largest increase in five decades. Payroll tax was up 13% and corporate taxes were up 14%.
With a dramatic increase in all of the tax collections, the Federal deficit declined substantially in 2022. However, the $1.4 trillion estimated deficit was still the fourth highest ever. The 2020 deficit was the highest on record and reached a peak number of $3.1 trillion.
The 2022 deficit declined substantially because of the return to normal activity after devastating losses to the entire nation during the COVID pandemic. The government had estimated that the 2022 deficit would be approximately $1 trillion. The increase from $1 trillion to $1.4 trillion reflects the decision of the President to offer $426 billion in student loan forgiveness.
The vast majority of federal revenue comes from individual income taxes. Of the total federal revenue, 84% came from individual income and payroll taxes. While there was an $850 billion total increase, 89% of this amount, or $758 billion, was the result of the increased income and payroll taxes.
The individual tax amounts were estimated to increase from $2.04 trillion in 2021 to $2.64 trillion in 2022. The federal 2022 year ended on September 30, 2022.
A moment of history gives some perspective on this large increase in tax payments by individuals. This $539 billion increase in taxes from individuals was greater than the total taxes paid by individuals in 1995.
The Federal budget deficit was down by $548 billion. However, this was primarily due to the phaseout of various pandemic spending programs. There was a $468 billion reduction in tax credits and economic impact payments. The end of the enhanced unemployment insurance benefits saved $359 billion. Finally, the phaseout of the Paycheck Protection Program saved another $300 billion.
As a result of these reduced expenditures, the Federal deficit declined. However, the $1.4 trillion deficit remains a substantial number.