The Treasury expects to feed on a 28% surge in individual income taxes this year and another spurt in 2025 when the Trump tax cuts expire, according to a new budget analysis presented to Congress on Thursday.
The latest Congressional Budget Office report revealed expectations of $2.6 trillion in individual income taxes this year, up from $2 trillion last year.
Not only is that the highest ever, but it is also the biggest share of gross domestic product since income taxes began.
"In 2021, receipts from individual income taxes totaled $2.0 trillion, or 9.1% of GDP. Under current law, and on the basis of receipts observed through late April of this year, CBO expects individual income tax receipts to rise by 28% in 2022, to $2.6 trillion. At 10.6% of GDP, that total is expected to be the highest amount of individual income tax receipts recorded since 1913, when ratification of the Sixteenth Amendment authorized the federal government to begin collecting income taxes," said the agency.
The CBO said that the overall federal revenue is expected to reach a record $4.8 trillion in 2022, a 19% one-year increase.
“The strong revenue growth in 2021 and 2022 results mostly from large increases in collections of individual income taxes. Total revenues in 2022 are projected to equal 19.6% of the nation’s gross domestic product — the largest annual revenues relative to the size of the economy since 2000,” said the CBO.
The numbers were higher than the agency predicted last year, and as the economy recovers following the virus crisis, they are expected to go further.
What’s more, the CBO suggested that if the Internal Revenue Service receives the budget hike sought by President Joe Biden, its collections will rise even further.
People are now paying more in total income taxes than ever, even considering the 2017 tax cuts signed by former President Donald Trump. And they will be paying significantly more when elements of those tax cuts expire in 2025, said the CBO.
“Receipts from individual income taxes — the largest source of federal revenues — rose sharply in 2021 and are projected to do so again in 2022 as the economy recovers from recession and temporary provisions enacted in response to the pandemic expire. Those receipts are projected to rise again after 2025 because of the scheduled expiration of some provisions of the 2017 tax act,” read the report.