Now that April 15 has passed, the Internal Revenue Service (IRS) is busy processing tax payments. So it’s a good time to consider historical patterns in the amount the tax authority collects, as well as the fractions that come from different sources: business income, employment, estate, excise, gift, and individual income taxes.
The IRS reports that it collected nearly $2.9 trillion dollars from taxpayers in 2013, the latest year data are available. That’s an increase of $331 billion, or 13.1 percent over 2012 levels. However, it is 5.6 percent lower than the 2007 peak, when measured in inflation-adjusted dollars.
Nearly all of the money collected by the IRS comes from taxes on individuals. Last year, 53.9 percent came from individual income tax, while 31.4 percent was obtained from employment taxes. Only 10.9 percent was gathered from taxes on business income.
Taxes on business income were not always such a small fraction of total collections. Back in 1960, they accounted for nearly one quarter of what the IRS brought in. But, as the figure below shows, the business income tax share of total collections has hovered in the neighborhood of ten percent since the early 1980s, with only brief upward spikes, and has never returned to the fraction it routinely accounted for in the 1960s and 1970s.
The decline in the share of collections that comes from levies on business income has been offset by a rise in the fraction that comes from employment taxes. Between 1960 and 1989, the share of IRS collections coming from employment taxes rose from 12.2 percent to 35.6 percent. Since 1989, the fraction has fluctuated in the low-to-mid-thirty-percent range.
By contrast, the share of the total that comes from individual income tax has fluctuated within a tight band over the past 50 years. In 1970, for instance, the fraction was 53.0 percent, as compared to 53.9 percent last year.
Excise taxes, such as cigarette or gasoline taxes, have declined substantially over the last half century. Back in 1960, they accounted for 12.9 percent of total collections. In 2013, they made up only 2.1 percent.
Estate and gift taxes account for only a small fraction the amount the IRS brings in. In 2013, the former accounted for 0.5 percent of the total garnered by the agency, while the latter made up 0.2 percent. While last year’s figures are smaller than in previous years, estate and gift taxes combined have never reached three percent of total IRS collections.
Share of IRS Collections from Individual Income Tax, Business Income Tax and Employment Tax, 1960-2013
Source: Created from data from the IRS annual Databook.
Source: Small Business Trends
IRS Tax Collections