A FINANCIAL OVERVIEW OF THE U.S. GOVERNMENT

How much of the nation’s income does the government take as taxes? Figure 1 shows government revenue, including federal, state, and local governments, as a percentage of total income for the U.S. economy. It shows that the role of government has grown substantially over the past century. In 1902, the government collected 7 percent of total income; in recent years, government has collected about 30 percent. In other words, as the economy’s income has grown, the government’s revenue from taxation has grown even senior.

Figure 1 Government Revenue as a Percentage of GDP

This figure shows revenue of the federal government and of state and local governments as a percentage of gross domestic product (GDP),which measures total income in the economy. It shows that the government plays a large role in the u.s. economy and that its role has grown over time.

TABLE 1 Central Government Tax Revenue as a Percentage of GDP

The overall size of government tells only part of the story. Behind the total dollar figures lie thousands of individual decisions about taxes and spending. To understand the government’s finances more fully, let’s look at how the total breaks down into some broad categories.

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