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Where Do Our Tax Dollars Go?

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April 15th… that dreaded date is rapidly approaching. As we scramble to pay “our fair share,” one question seems to get lost in the shuffle: What did I just pay for? Well, a lot of things. Some of which are going to surprise you. Perhaps you thought you were paying thousands for assistance to countries whose citizens seem to like to stomp around and burn our flag? No … it’s about $40 a year. Keep in mind now that if interest rates rise so will interest on the debt—and that could get nasty. Then again, if a major war breaks out, we’re all going to have to ante up.

 

 

The average household paid about $13,000 in income taxes to Uncle Sam for 2015. (We haven’t paid for 2016 yet remember.) Of that $13,000, the federal government spent:

$3,728.92 (28.7 percent) on health programs

$3,299.13 (25.4 percent) on the military

$1,776.06 (3.7 percent) on interest on the debt

$1,040.93 (8 percent) on unemployment compensation and labor programs

$771.26 (5 percent) on veterans’ benefits

$598.74 (4.6 percent) on food and agriculture programs

$461.59 (3.6 percent) on education programs

$377.50 (2.9 percent) on general government expenses

$250.03 (1.9 percent) on housing and community programs

$207.68 (1.6 percent) on energy and environmental programs

$194.29 (1.5 percent) on international affairs programs

$150.68 (1.2 percent) on transportation funding

$143.20 (1.1 percent) on scientific funding

Next question….Who’s actually paying most of the taxes? Do the wealthy pay less taxes than the middle class and the poor?

The study, from the Institute on Taxation and Economic Policy, found that “virtually every state’s tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families.” The report added that state and local tax systems are “indirectly contributing to growing income inequality by taxing low- and middle-income households at significantly higher rates than wealthy taxpayers.” In other words, it said that the tax systems are “upside down,” with the poor paying more and the rich paying less. Overall, the poorest 20 percent of Americans paid an average of 10.9 percent of their income in state and local taxes and the middle 20 percent of Americans paid 9.4 percent. The top one percent, meanwhile, pay only 5.4 percent of their income to state and local taxes.

But numbers like these can be misleading, and there are two sides to every coin. Drawing a far different conclusion, the more conservative Tax Policy Center has concluded that the “top one percent of Americans paid 33.4 percent of their expanded cash income (a broad measure of pretax income) in federal taxes. Middle class Americans—or those in the middle 20 percent —pay 13.7 percent of their income to federal taxes, while the poorest pay 3.1 percent.

Up to now, it doesn’t appear that any study has looked at the combined federal, state, and local tax burdens as a share of certain income groups. But Roberton Williams of the Tax Policy Center said that combining all taxes would almost certainly show that the wealthy pay more than the rest.

In other words, we’re probably not going to be able to give you a final answer on that one any time soon. So I guess, as Einstein would have said, “Everything is relative”…even taxes.

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