Where Does Your Tax Money Go? Anyone? Anyone?

taxes fileIt’s tax time again, and as you look over your tax payments for calendar 2016, you’re undoubtedly wondering where those dollars are being spent.

The Wall Street Journal recently published a chart which breaks down spending for every $100 of tax receipts—and concludes that the U.S. government spends like a very large insurance company that also happens to have an army.

 

Tax Breakdown TWSJ

 

For every $100 you pay in taxes, $23.61 goes to Social Security payments and administration.  Another $15.26 goes to Medicare, the government health insurance program.  Medicaid, the health insurance program for the poor, accounts for another $9.55 of that $100 tax bill—bringing the total costs for various civilian insurance programs to 48% of the total budget.  And that army?  It costs $15.24 of every $100 the government collects in taxes, not counting veterans’ benefits (which cost $4.58 of the $100).

One item of note that isn’t apparent from this chart is the gap between revenues and expenses, aka the federal deficit, which equaled $15.24 out of every $100 in 2016. This troubling figure raises the challenging question: What expenses would you cut to bridge that gap?

Things like federal expenditures and grants for education ($2.08), food stamps ($1.89), affordable housing ($1.27) and foreign aid ($1.14) comprise a very small part of the budget, smaller than interest payments on the national debt ($6.25).

You also may have heard about reducing the budget by cutting the budget for the National Endowments for the Arts and Humanities, which together represent eight tenths of one cent of that $100 tax bill.  This would be comparable to trying to pay off your mortgage by looking for coins under your sofa cushions.

We can easily help you create a better strategy for paying off your mortgage but reducing the deficit is going to be a tough job for the President and Congress. It will entail cuts in programs (“I’m looking at you Social Security!”) that are going to be unpopular but the alternative is to raise taxes to increase revenue and I haven’t met anyone, yet, who thinks they should be paying more in taxes! Anyone?  Anyone? Bueller?

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Evelyn Zohlen
“My own life-changing transition inspired me to start Inspired Financial so that I could help other women and their families navigate their difficult life transitions and emerge confident, financially secure and empowered to deal with future life events.”

3 Comments

Cary Spalding

I agree the problem seems daunting, but that is a huge gap and it is logical to look at the largest items of expense first. There is a lot of likely waste in with the big five and not to look there to trim the sails will mean the problem won’t be solved.

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Evelyn Zohlen

Whether it’s personal, business, or government, balancing the budget always requires tough choices! Thanks for your comment.

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Tony Ceballos

OK, so now I’m a bit smarter on where my tax dollar goes. I’ve always thought the biggest expense was defense, but even at third place I think we spent too much on war stuff. Some of our leaders think we need the biggest, baddest weapons to keep protect ourselves in our world, and have more than any other country too. I’ve never agreeded with that thinking but I know I’m in the minority cause we keep spending on defense. There must be better ways to keep peace in our world. Oh well.

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