The largest source of federal revenue is the individual income tax. For fiscal year 2026, the Congressional Budget Office projects it will generate roughly $2.8 trillion, about half of everything the federal government takes in. Payroll taxes come next at around $1.8 trillion, and corporate income taxes trail at $404 billion. Individual income taxes have held the top spot for decades, and the gap between them and the next-largest source is wide enough that no other stream is close.
Why Individual Income Taxes Sit at the Top
The federal government’s authority to tax income traces to the Sixteenth Amendment, ratified in 1913, which lets Congress tax income from any source without apportioning the bill among states by population.1Congress.gov. U.S. Constitution – Sixteenth Amendment In fiscal year 2024, the individual income tax alone brought in $2.4 trillion out of $4.9 trillion in total federal revenue.2U.S. Treasury Fiscal Data. Government Revenue Nothing else the government collects comes close in scale.
The tax is progressive: higher slices of income are taxed at higher rates. For tax year 2026, marginal rates run from 10 percent on the first dollars of taxable income up to 37 percent on income above $640,600 for single filers and $768,700 for married couples filing jointly.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Moving into a higher bracket doesn’t push all your income into that rate. Only the dollars above each threshold get taxed at the new rate.
Most workers never write a check to the IRS during the year because employers handle the mechanics through payroll withholding. Your employer takes a portion of each paycheck based on your Form W-4 and sends that money to the Treasury on your behalf.4Internal Revenue Service. Tax Withholding At tax time, Form 1040 reconciles what was withheld against what you actually owe.5Internal Revenue Service. About Form 1040, U.S. Individual Income Tax Return Investment income also falls under this umbrella. Capital gains and qualified dividends are taxed at preferential rates for most filers, but they still flow through the individual income tax system and count toward that roughly-half-of-all-revenue figure.
How the Other Sources Compare
Payroll Taxes
The second-largest revenue source is payroll taxes, projected at about $1.8 trillion for fiscal year 2026. These are mandatory deductions collected under the Federal Insurance Contributions Act for employees and the Self-Employment Contributions Act for people who work for themselves.6Social Security Administration. What Are FICA and SECA Taxes? Unlike general income taxes, this money is earmarked for the Social Security and Medicare trust funds.
For 2026, the Social Security tax rate is 6.2 percent each for employee and employer, applied to earnings up to $184,500.7Social Security Administration. Contribution and Benefit Base Every dollar above that cap is free of Social Security tax. Medicare works differently: 1.45 percent on each side with no earnings cap at all.8Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates High earners face an additional 0.9 percent Medicare surtax on wages above $200,000 for single filers and $250,000 for joint filers.9Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax Self-employed workers pay both halves, which comes to 15.3 percent of net earnings.10Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Corporate Income Taxes
Corporate income taxes rank a distant third. The CBO projects about $404 billion in fiscal year 2026, a fraction of the individual income tax haul. Since the Tax Cuts and Jobs Act of 2017, corporations have paid a flat 21 percent rate on taxable income.11Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed Before that law, the top corporate rate was 35 percent with a graduated schedule, and corporate taxes made up a larger share of the pie.
Starting in 2023, the Inflation Reduction Act added a 15 percent minimum tax on large corporations based on their financial statement income rather than their taxable income. It only applies to corporations averaging more than $1 billion in annual financial statement income, so it affects a relatively small number of very large firms.12Internal Revenue Service. Corporate Alternative Minimum Tax
Excise Taxes, Customs Duties, and Other Sources
The remaining federal revenue comes from smaller streams that collectively add hundreds of billions of dollars. Excise taxes hit specific goods and activities: 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel, plus levies on tobacco, alcohol, air travel, and certain health-related items.13U.S. Energy Information Administration. How Much Tax Do We Pay on a Gallon of Gasoline and on a Gallon of Diesel Fuel? The fuel rates haven’t changed since 1993.
Customs duties have grown substantially in recent years due to expanded tariff policies. Through the first several months of fiscal year 2025, duties collected under emergency tariff authority alone reached $133.5 billion, a sharp departure from the modest customs revenue of prior decades.
The federal estate tax applies when someone dies leaving assets above a generous exemption. For 2026, that exemption is $15 million per individual, or $30 million for a married couple.14Internal Revenue Service. What’s New – Estate and Gift Tax Amounts above the threshold face a top rate of 40 percent.15Office of the Law Revision Counsel. 26 USC Chapter 11 – Estate Tax Fewer than 1 percent of estates owe any federal estate tax, so this source generates relatively little revenue. Miscellaneous receipts, including Federal Reserve remittances and various government fees, fill in the margins.
How the Revenue Mix Has Shifted
The balance among these sources has changed. In the middle of the twentieth century, corporate income taxes contributed roughly a quarter of federal revenue. Today that share sits closer to 8 to 10 percent. The decline reflects lower statutory rates, broader use of deductions and credits, and the growth of pass-through business structures like S corporations and LLCs, where profits flow through to individual returns instead of corporate ones. That shift partly explains why individual income taxes have grown to dominate.
Payroll taxes, meanwhile, have grown from a small fraction to about a third of total revenue as Social Security and Medicare expanded. Customs duties, once the primary funding source for the federal government in the 1800s, shrank to near irrelevance before recent tariff policies revived them as a meaningful contributor. The constitutional authority behind all of this sits in Article I, Section 8, which grants Congress the power to lay and collect taxes, duties, and excises.16Constitution Annotated. Article I Section 8 – Enumerated Powers
What the Government Doesn’t Collect
Two figures put the size of individual income tax collections in context. The first is what escapes the system. The IRS estimates a gross tax gap of $696 billion for tax year 2022, the most recent year with available data.17Internal Revenue Service. IRS: The Tax Gap The gap breaks into three pieces: $539 billion in underreported income on filed returns, $94 billion in taxes reported but not paid on time, and $63 billion from people who didn’t file at all. In fiscal year 2024, IRS audits recommended over $29 billion in additional tax.18Internal Revenue Service. SOI Tax Stats – IRS Data Book The government collects roughly 85 to 87 cents of every dollar it is legally owed.
The second figure is what the government chooses not to collect. Tax expenditures are deductions, exclusions, and credits written into the tax code that reduce what taxpayers owe. The largest single tax expenditure for fiscal year 2026 is the exclusion for employer-sponsored health insurance, worth an estimated $296 billion in forgone revenue. Other major expenditures include the exclusion of imputed rental income at about $157 billion and tax-deferred retirement savings in employer-sponsored plans like 401(k)s at $156 billion.19U.S. Department of the Treasury. Tax Expenditures The government forgoes more revenue through deliberate policy choices than it loses to noncompliance, and both figures come out of the individual income tax base that already supplies half of everything the federal government takes in.