What Services Does Tax Money Fund?

Taxes are an essential part of the functioning of any government, and the money collected is used to fund a variety of public services. Most tax money helps finance defense, Social Security, Medicare, health programs, and social safety nets such as food stamps and disability payments, in addition to paying interest on the national debt. To get a better understanding of where your tax money is spent, you can use a federal taxpayer's receipt to enter your income, Social Security and Medicare taxes and get a personalized view of where your tax money was allocated. Nearly 25 percent of all income taxes go to paying for defense.

Of that amount, the salaries and benefits of members of the armed forces account for approximately one quarter, while most of the rest goes to equipment and supplies, as well as weapons, construction and research and development. About 22.5 percent of income tax revenue goes to health care programs. The two big expenses are for Medicare and Medicaid, but the additional amounts go to health research, food safety and public health services, and disease control. The government spends approximately 17 percent of income tax revenue on various programs that provide money to those in need, including retirement benefits for federal employees, food and nutrition assistance, and supplemental income security.

The earned income tax credit and the child tax credit are also funded by income tax revenues. The national debt incurs a substantial amount of interest each year; even with today's low interest rates, about 8 percent of your income tax money goes toward paying interest annually. Approximately 4.5 percent of the spending goes to pay for various benefits for veterans. The rest goes to education, training and other benefits for former military personnel.

Most of the 3.3 percent of income tax revenue spent on education and job training goes to fund education through high school. University financial aid, along with job training for people with disabilities and more general job training and employment services for the general public, take up the rest. Just over 2 percent of income tax revenue goes to support national immigration and law enforcement programs. These expenses help fund the national court system, as well as federal law enforcement agencies and the federal service implemented by the U.

S. UU. About 2 percent of income tax revenues are spent on various expenses related to the nation's natural resources. About a third of that money goes to water and land management, and the rest funds environmental protection initiatives, as well as to the management of the country's energy assets and conservation efforts. Money earmarked for international initiatives represents about 1.7 percent of total income tax revenues.

Approximately half of that amount is spent on humanitarian assistance and economic development, while the rest is divided between the costs of maintaining embassies and diplomatic missions and providing security assistance abroad. Just over 1 percent of income taxes go to science-related programs. More than half of that amount goes to NASA, but additional recipients include the National Science Foundation, as well as several national laboratories and other research facilities. When thinking about the costs imposed by taxes, it is essential to balance those costs with the benefits that the nation receives from public services. All citizens must pay taxes and contribute their fair share to the health of the government and the national economy. When analyzing sources of tax revenue by region, including countries that do not belong to the OECD, there is a large variation that reflects economic and social differences between regions.

Generally speaking, the federal government collects income, corporate and payroll taxes; the state collects income and sales taxes; and municipalities or other local governments collect primarily property taxes. As we shall see later, most economists also agree that income taxes create more economic damage than taxes on consumption and property. Understanding what triggers a tax situation can allow taxpayers to manage their finances to minimize the impact of taxes. It would literally take millions of federal, state and local tax agents to do what companies do for governments every day. Consequently, when considering taxation it is important to weigh up both its costs as well as its benefits in order to ensure that citizens are contributing their fair share towards public services.

Kirk Streets
Kirk Streets

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