Weed Revenue: Millions For The Government

Weddings are a lucrative business, with the average cost of a wedding in the United States in 2024 reaching $33,000, a $4,000 increase from 2023. The average expenditure for a wedding in New Jersey in 2022 was about $51,000, while in Massachusetts, the average cost was $30,489. With the high costs of weddings, it's no surprise that the wedding industry generates significant revenue. The cost of a wedding depends on various factors, such as the size and location of the venue, the number of guests, food, and entertainment. The reception venue, catering, and entertainment are typically the most expensive parts of a wedding.

Income taxes

Individual income tax is the largest single source of revenue for the US federal government, and has been since 1944. In 2022, individual income tax comprised 54% of total revenues, and 10.5% of GDP. In 2023, the federal government collected just under $2.18 trillion in income taxes, or 48.7% of total revenue.

In 2023, total federal spending was $6.1 trillion, with total federal receipts at $4.4 trillion. In 2022, the federal government collected revenues of $4.9 trillion. In the fiscal year 2025, the US government estimates its total revenue to be $5.49 trillion, with income taxes slated to contribute $2.6 trillion.

In 2019, the top quintile of earners paid 84% of all individual income taxes, while people in the two lowest income quintiles had negative income tax liabilities. In other words, on average, they received more in refundable tax credits than they owed in income taxes.

Federal income taxes are structured in graduated brackets ranging from 10% to 37% of adjusted gross income. Long-term capital gains are taxed at a different rate, ranging from 0% to 20%.

Payroll taxes

The Federal Insurance Contributions Act (FICA) mandates that employers and employees each pay 7.65% of payroll in FICA taxes, which are split equally between Social Security and Medicare. The Social Security tax rate is 12.4%, with a wage base limit of $168,600, while the Medicare tax rate is 2.9%, with no cap. For high-income earners, an additional 0.9% Medicare tax is imposed on employees, which is not matched by the employer. Self-employed individuals are responsible for paying both the employee and employer portions of the tax.

In addition to FICA taxes, there are a few other types of federal payroll taxes that fund smaller programs. The Federal Unemployment Tax Act (FUTA) taxes are paid only by employers at a rate of 6% on the first $7,000 of an employee's earned income per year. The State Unemployment Tax Act (SUTA) taxes are levied by individual states, with varying tax rates, and are generally paid only by employers. However, in a few states, employees also contribute to these taxes.

Corporate taxes

Corporate income taxes are the third-largest source of revenue for the federal government, but they account for a relatively small amount of total federal tax collections. In 2023, the federal government collected $475 billion from corporate income taxes, which is just 10% of the total $4.8 trillion in federal tax revenues for that year. This is a decrease from the 1950s and 1960s, when corporate tax revenues represented an average of 4.2% of GDP. In 2022, they represented just 1.7% of GDP. The share of corporate income tax revenues as a percentage of the economy in the US is one of the lowest among G7 countries, who on average collect 2.3% of GDP from that source.

The US corporate tax system has been the subject of frequent debate and has seen significant changes in recent years. In 2017, the Tax Cuts and Jobs Act (TCJA) was enacted, reducing the federal tax rate on corporations to 21%, down from its previous level of 35%. This rate is low by historical standards, as the statutory rate averaged over 50% in the 1950s and 1960s. The current federal corporate tax rate is applied to all business income of C corporations, an Internal Revenue Service (IRS) designation for a taxable entity. Additionally, 44 states and the District of Columbia impose their own taxes on corporate income, so a C corporation operating in the US could face a combined tax rate higher than 21%. In 2022, corporations paid an average combined tax rate of 26%, which is in line with the average combined national and sub-national corporate income tax rate among G7 countries.

The decrease in the statutory rate and the increasing prevalence of pass-through businesses, which are not taxed as corporations, have contributed to the decline in revenues from corporate taxes as a share of GDP. Pass-through businesses include sole proprietorships, partnerships, S corporations, and limited liability companies, which allocate profits to their owners who then pay taxes on those profits through the individual income tax code. In 1980, C corporations represented 17% of all businesses, but by 2015, they accounted for just 5%. S corporations, which are companies with a small number of shareholders who elect to pass corporate income and losses through to their shareholders for federal tax purposes, experienced the largest increase during this period, growing from 4% of all businesses in 1980 to 13% in 2015.

The federal government uses the revenue from corporate and other taxes to fund a variety of goods, programs, and services to support the American public and pay interest incurred from borrowing. In fiscal year 2023, the federal government spent $6.1 trillion, with the majority going towards health insurance, Social Security, defense, and veterans' benefits.

Customs duties

In the United States, Congress establishes import duties, and the International Trade Commission (USITC) publishes the Harmonized Tariff Schedule (HTS), which lists the rates for imports. The HTS provides duty rates for almost every item. The US Customs and Border Protection (CBP) uses the Harmonized Tariff Schedule of the United States Annotated (HTSUS), a reference manual that provides the applicable tariff rates and statistical categories for all merchandise imported into the US. The specific duty rate for an article is determined by a number of factors, including where the article was acquired, where it was made, and what it is made of. The duty rate is a percentage of the total purchased value of the article(s) paid at a foreign country and is not based on factors such as quality, size, or weight.

Different products and countries of origin may have different customs duties associated with them. For example, the United States has imposed a 100% duty rate on certain products from Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and Ukraine. On the other hand, the US gives customs duty preferences to certain designated beneficiary developing countries under a trade program called the Generalized System of Preferences (GSP). Some products that would otherwise be dutiable are not when they are wholly the growth, product, or manufacture of a beneficiary GSP country.

In addition to protecting local industries and generating revenue, customs duties can also be used to control the flow of specific goods and to penalize a particular nation by charging high import duties on its products.

Excise taxes

As of August 2024, 21 states levy an excise tax on recreational cannabis purchases, with an additional 12 states allowing local governments to levy an excise tax. These excise taxes take different forms, including percentage-of-price taxes, weight-based taxes, and potency-based taxes.

Percentage-of-price taxes are calculated as a percentage of the retail price, paid by consumers, and remitted to the government by the retailer. State cannabis tax rates range from 6% in Missouri to 37% in Washington. Local cannabis taxes are typically capped by the state and set between 2% and 5%.

Weight-based taxes are levied in Alaska, Colorado, Maine, Nevada, and New Jersey. In these states, the cultivator is responsible for remitting the tax to the government, and different parts of the plant are taxed at different rates, with the flower usually taxed at the highest rate due to its potency.

Potency-based taxes are calculated based on the cannabis product's level of tetrahydrocannabinol (THC), the primary psychoactive compound in cannabis. Connecticut, Illinois, and New York use THC in their tax calculations.

The revenue generated from excise taxes on cannabis is substantial. In 2021, the first five states to legalize recreational cannabis (Colorado, Washington, Alaska, Oregon, and California) collectively generated $2.78 billion in revenue from taxes on cannabis sales. In 2022, states collected nearly $3 billion in marijuana revenues, and nationwide legalization could generate $8.5 billion annually for all states.

Frequently asked questions