Where the Postal Service’s Money Comes From

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Here’s a number that ought to confuse you. In the fiscal year that ended September 30, 2024, the United States Postal Service took in $79.5 billion in operating revenue, and in that same year it reported a $9.5 billion net loss. A business that big, losing that much, and somehow still delivering to your door six days a week.

So who pays for it? When the Postal Service burns through nearly ten billion dollars more than it earns, does the bill land on your tax return?

The short answer is no, and the reason matters.

The Postal Service runs almost entirely on what its customers pay it: postage on letters, fees on packages, the cost of a passport photo at the counter. The agency itself puts it plainly, saying it “generally receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.”

Congress still appropriates a small amount each year for specific mandates, like free mail for the blind and overseas voting materials, but those are tens of millions in a budget measured in tens of billions. The day-to-day machine pays for itself.

So how does an organization cover its costs from sales and still post a loss the size of a small country’s budget? That gap is the real story, and it runs through monopoly rights, a fight over accounting, and a debate about whether “self-funded” describes economic reality or merely a label on the books.

The 1970 Bargain That Set the Rules

For most of American history, the post office was a federal department like any other, funded by Congress and run at a planned deficit. That changed with the Postal Reorganization Act of 1970.

As the American Postal Workers Union and the statute’s own text in Title 39, §101 confirm, the law set up a universal service obligation requiring USPS to serve all communities, including rural areas, at fair, uniform prices as the trade-off for its monopoly protections. It also turned the old Post Office Department into an “independent establishment of the executive branch,” and told it to live on its own earnings.

The deal Congress struck was a trade. The Postal Service would stop drawing operating subsidies, but in exchange it kept two valuable protections: a legal monopoly on letter mail and the exclusive right to put things in your mailbox. Give the agency a stable revenue base it can defend against competitors, and let customer payments, not annual appropriations, discipline how it spends.

That bargain still governs the books today. The Postal Service’s Office of Inspector General describes the arrangement bluntly: “it is supported by the longstanding mailbox and mail delivery monopolies rather than from congressional appropriations.”

But Congress did not hand over a normal business. Federal law in section 101 of title 39 declares that the Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people.

Read that last clause again. Supported by the people. The law imagines a public service that funds itself, two ideas that pull in opposite directions and have been straining against each other ever since.

The same statute makes the tension concrete. It says “no small post office shall be closed solely for operating at a deficit,” A private firm would shutter an unprofitable branch on a Tuesday afternoon. The Postal Service is forbidden from doing it.

That single sentence tells you the network was never designed to make money at every point. It was designed to reach everyone, and the profitable parts are expected to carry the rest.

Where the $79.5 Billion Actually Comes From

Walk into the revenue side and you find three big rivers feeding one reservoir. First-Class Mail, Marketing Mail, and Shipping and Packages are the three largest sources, with smaller streams from periodicals, international mail, and counter services like money orders and PO box rentals.

First-Class Mail is the one you know: stamped letters, bills, the birthday card from your aunt. It is also the strangest line on the page, because its revenue keeps rising while its volume keeps falling.

Letter volume dropped from 48,960 million pieces in fiscal 2022 to 44,312 million in fiscal 2024. Over that same stretch, First-Class revenue climbed from $23.990 billion to $25.414 billion. Fewer letters, more money. The trick is price increases, which the agency has leaned on hard, plus a shift toward heavier and higher-value items.

Here is the table that makes the pattern visible.

Source: USPS Fiscal Year 2024 Annual Report to Congress (figures on the USPS reporting basis; Postal Regulatory Commission totals may differ slightly). Revenue rises as volume falls because of price increases and a shift in product mix.

Marketing Mail is the advertising in your box: catalogs, coupons, the political flyers that arrive in clumps before an election. The annual report defines it as mail that “includes advertisements and marketing packages weighing less than 16 ounces” and meeting certain preparation rules. It carries less monopoly protection than letters, but it fills capacity the carriers are already driving past, and in fiscal 2024 its revenue rose by $292 million, or 1.9 percent.

Then there’s the growth story everyone points to: packages. Shipping and Packages revenue rose by roughly $625 million, or 2.0 percent, in fiscal 2024, with volume up 2.7 percent. The agency’s 2024 Form 10-K credits that gain mostly to USPS Ground Advantage, its economy ground-shipping product, while noting it was partly offset by drops in Priority Mail caused by intense competition, customers moving away from expedited service, and the retirement of the First-Class Package Service product.

Packages, in other words, are not one thing. They are a bundle of products fighting different wars against FedEx, UPS, and Amazon’s own delivery fleet.

The thread tying all three together: nearly every dollar arrived because someone chose to buy something. Not because Congress wrote a check.

So Why Does It Lose Money?

Paying your own bills and breaking even are not the same thing, and this is where the confusion usually starts. The Postal Service earns its revenue from customers, then spends more than it earns. In fiscal 2024 its expenses under standard accounting rules, what it called “total GAAP operating expenses”, came to $89.5 billion, up $4.1 billion, or 4.8 percent, from the year before. Subtract revenue from expenses and you land near that $9.5 billion loss.

But here’s the part that trips people up. Most of that loss has almost nothing to do with stamps and trucks. The Postal Service says over 80 percent of the fiscal 2024 net loss came from factors outside management’s control: the amortization of unfunded retiree pension liabilities, which means paying down old pension promises that were never funded, and non-cash adjustments to workers’ compensation, paper-only changes that cost no actual money. The single biggest reason the loss grew by $3.0 billion year over year was an on-paper change in workers’ comp costs, a figure that moves when the experts who estimate future costs revise their assumptions about future medical costs and interest rates.

To separate the engine noise from the operating performance, the Postal Service also reports a “controllable loss,” which strips out the items management cannot touch. On that measure, the fiscal 2024 number was $1.8 billion, an improvement from over $2.2 billion the prior year. So the day-to-day operation got better even as the headline loss got worse.

Both things are true at once, which is exactly why the Postal Service’s finances are so easy to argue about and so hard to pin down.

Nothing illustrates the gap between accounting and operations like fiscal 2022, when USPS reported $56.0 billion in net income. That was not a year the post office struck gold. It was a one-time accounting earthquake, and to understand it you have to go back to 2006.

The 2006 Law That Manufactured the Numbers

In December 2006, Congress passed the Postal Accountability and Enhancement Act, signed into law on December 20. The statute’s own first line is modest: “This Act may be cited as the ‘Postal Accountability and Enhancement Act’.” Its consequences were not.

This law did two big things. It capped the prices the Postal Service could charge on monopoly mail, tying increases to inflation, and it created a fund with a famously punishing payment schedule.

As the statute put it, “There is established in the Treasury of the United States a Postal Service Retiree Health Benefits Fund which shall be administered by the Office of Personnel Management.” That fund required USPS to prefund retiree health benefits, setting aside money now for health coverage its workers would not use for decades, on a schedule no other federal agency or large private employer faced.

The bills came due fast and the agency could not pay them. The Lexington Institute notes that USPS made no prefunding payment after 2011, and that those missed payments totaled $28.1 billion by 2016. The Postal Service was technically self-funding and technically billions in default, a combination that pushed it onto the federal watch list.

This is where two sharply opposed camps look at the same fund and see opposite things, and both deserve a fair hearing.

The labor side, voiced by leaders like Mark Dimondstein, former president of the American Postal Workers Union (succeeded by Jonathan Smith in November 2025), which represents more than 200,000 clerks and maintenance and motor vehicle workers, argues the crisis was largely manufactured on paper. The Brookings Institution lends weight to that reading, noting that USPS “generates enough revenue to cover its operating costs,” and that it is the pension and retiree health obligations, the prefunding mandate among them, that drove the bottom line into the red. Ruth Y. Goldway, a former chair of the Postal Regulatory Commission, publicly criticized the prefunding requirement as an unnecessary and distorting burden. Strip out a congressional accounting choice, the argument goes, and you find an operation that roughly washes its own face.

Fiscal reformers read it the other way. They concede the prefunding schedule was harsh, but argue that removing it merely exposed how weak the underlying business is. We’ll come back to their case, because the 2022 fix that ended prefunding turned out to be a useful natural experiment.

The 2022 Reset and the $56 Billion Mirage

Congress finally moved in April 2022 with the Postal Service Reform Act, Public Law 117-108. The law killed the prefunding requirement outright, with language stating “No Postal Service contribution shall be required…for the amortization of the unfunded liability of the Postal Service Retiree Health Benefits Fund…” It also canceled the outstanding unpaid obligations that had been crushing the balance sheet.

When those liabilities vanished from the books, the Postal Service got to cancel costs it had recorded over many years, all in a single stroke. That reversal is the $56.0 billion in net income for fiscal 2022. Not a single extra letter delivered. Only an accounting entry catching up with a legal change.

The very next year, with the one-time gain behind it, the agency swung to a $6.5 billion net loss on $78.2 billion of revenue. The whiplash from a $56 billion gain to a $6.5 billion loss in twelve months was not an operational collapse. It was the same business, seen through a corrected lens.

The 2022 law did more than erase debt. It also pulled postal retirees more fully into Medicare and built a new health program, instructing that “The Office of Personnel Management shall establish and administer a Postal Service Health Benefits Program…for employees of the United States Postal Service, annuitants, and their family members.”

That Medicare integration carried a quiet fiscal twist. For retirees who were eligible for premium-free Medicare Part A but had skipped Part B, the law opened a special enrollment window from April through September 2024, and any late-enrollment penalty those retirees would normally owe gets paid by USPS directly to the Centers for Medicare and Medicaid Services. The reform relieved one obligation and quietly took on a new cost. The law also locked in something postal unions had long wanted, requiring that the Postal Service deliver mail and packages at least six days a week.

Who Actually Pays for Universal Service?

Strip away the accounting drama and a structural question remains: somebody has to pay for delivering to addresses that lose money, and the law forbids walking away from them. So who covers the rural route that costs more to serve than it brings in?

The profitable, high-volume parts of the network are supposed to fund the parts that cannot pay for themselves. That is a cross-subsidy, and the monopoly rights are the tool that makes it possible. The OIG explains that the letter and mailbox monopolies exist to help fund the infrastructure and other costs of providing the universal service, including to locations that may not otherwise be financially sustainable for a carrier to serve.

How much is that obligation worth, and how much are the monopolies worth? The Postal Regulatory Commission once tried to put numbers on it. Using fiscal 2007 data, the Commission estimated the annual cost of the universal service obligation at $4.4 billion and the combined value of the letter and mailbox monopolies at $3.5 billion. By that early reckoning, the privileges nearly paid for the duties, but not quite. The same report called the duty to serve every part of the nation “paramount,” language that signals the obligation was not meant to bend to the balance sheet.

More recent figures suggest the gap has widened. The OIG reports that, by the Commission’s methodology, the net cost of universal service exceeded the value of the monopolies by $1.8 billion in fiscal 2022. The legal advantages Congress granted may no longer fully cover the legal burdens it imposed.

This is the heart of the labor argument, and Brian L. Renfroe, president of the National Association of Letter Carriers, and his predecessor Fredric V. Rolando have pressed it for years. The OIG describes USPS as “both a business and a public service,” required by law to reach “neighborhoods across the nation, six days a week, even those far-reaching places that private carriers don’t deliver to because it’s not profitable.” The same OIG note makes a point competitors rarely advertise: private carriers “often rely on the Postal Service to get packages to you” in remote areas they would otherwise skip, handing off the unprofitable last mile. If the public wants universal, uniform-rate service, the labor case runs, it is fair either to let USPS price freely enough to fund it, or to pay for the mandate directly, rather than declaring it unfunded and blaming the workers when the books do not balance.

The Case That “Self-Funded” Is Only a Label

Fiscal reformers accept that almost no tax dollars flow into postal operations, and then argue that the accounting misses the point. The Postal Service, they say, survives on a bundle of government-granted advantages that never show up as an appropriation but function like a subsidy all the same.

The cleanest evidence comes from a federal regulator, not an advocate. In December 2007, the Federal Trade Commission published a report titled Accounting for Laws That Apply Differently to the United States Postal Service and Its Private Competitors. Its conclusion, weighing the constraints USPS faces against the privileges it enjoys, was that the net effect of the remaining legal differences is likely to be a net competitive disadvantage for the Postal Service versus private carriers. The FTC pointed to the obvious one: The Postal Service enjoys a statutory monopoly over the delivery of letters and the exclusive right of access to customers’ mailboxes, while its private competitors are prohibited from using the mailbox for their deliveries.

What are those advantages worth? Robert J. Shapiro, chairman of the consulting firm Sonecon and a former Under Secretary of Commerce for Economic Affairs, took a swing at quantifying them in a 2015 study commissioned by UPS. His estimate pegged the full bundle of advantages at roughly $18 billion a year.

The federal income-tax exemption, the relief from state and local property taxes, and the below-market Treasury borrowing are all part of it, but the largest single piece by far is USPS’s exclusive access to customers’ mailboxes. The figure comes from a competitor-funded analysis and should be read with that interest in mind. By statute, USPS can borrow up to $15 billion from the Treasury‘s Federal Financing Bank at rates near Treasury yields, financing no private carrier with years of losses could match. Representative Darrell Issa has long argued that taxpayers would be on the hook if USPS cannot repay that debt.

The FTC report, though, also cuts the other way, and a careful reader should hold both halves. The same 2007 analysis found that the 2006 law genuinely constrains USPS. Here is the plain version: by law, your stamp money is not supposed to secretly underwrite the package business. The statute, as the FTC put it, requires that the Postal Service ensure that all costs attributable to competitive and market-dominant products are properly attributed to those products and prohibits the cross-subsidization of competitive products by market-dominant products.

The Postal Regulatory Commission audits the books every year to check, and its Annual Compliance Determination reviews whether each product pays for the costs it creates. The reformers’ strongest point survives this nuance: even after the 2022 law lifted the prefunding millstone, USPS keeps losing money, which suggests the privileges, not the operation, are what keep it standing.

What the FY2025 Numbers Reveal About the Next Decade

The most recent results put the whole debate to a test, because they show what the business looks like with the 2006 burden gone and no accounting fireworks left to mask the trend. In fiscal 2025, the Postal Service reported $80.5 billion in operating revenue, up 1.2 percent, which it credited “due largely to continued growth of our USPS Ground Advantage shipping service as well as strategic price increases in both of our mail and shipping categories.” The net loss was $9.0 billion, and the controllable loss climbed to $2.7 billion, up from $1.8 billion the prior year.

That last figure is the one to watch. Controllable loss strips out the pension and workers’ comp noise, so a worsening controllable loss means the operating core itself slipped backward after a year of improvement. The reservoir is still draining faster than the rivers refill it.

The long arc explains why. The Postal Regulatory Commission reports that total mail volume in fiscal 2025 came to 109 billion pieces, down nearly 50 percent from 213 billion in 2006, the year volume peaked. Market-dominant mail, the monopoly-protected letter mail, still supplies the majority of revenue, but its volumes keep sliding, and packages, while growing, face the most competitive market the agency has ever operated in.

The Postal Service’s answer is a ten-year strategy called Delivering for America, described as a plan designed to enable the Postal Service to achieve break-even operating performance over the next ten years through a combination of cost and revenue improvement strategies and regulatory and legislative actions. Break-even operating performance means something plain: stop losing money on day-to-day operations. The phrase to underline is legislative actions. The plan’s own framing concedes that operating fixes alone may not close the gap; another act of Congress might be required.

Which leaves the original question in a sharper form. The Postal Service pays for itself from postage and fees, that part is settled. What is not settled is whether it can keep doing so as letter volume falls toward a floor no one has located yet. The deeper question is whether the monopoly rights and tax privileges that have always quietly subsidized the network will be enough to carry it, or whether the bill the agency keeps deferring eventually arrives somewhere with a return address marked “taxpayer.” Delivering for America promises an answer by the early 2030s. The fiscal 2025 controllable loss, heading the wrong way, suggests the verdict is still wide open.

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