In a few months, tax season will return to plague the American public. The coming year is looking to be a confusing and possibly controversial year in taxes with the Trump administration’s new tax program officially going into effect.
Individual income tax makes about 47 percent of federal revenue. Because of that, taxpayers deserve to know exactly where their money is going.
Let’s break down the top 5 things taxes pay for and how much goes towards each expense.
- Defense and Security: Since the early 2000s,
defensehas been a vital percentage of the national budget. Recently, the Senate passed a $716 billion military budget for 2019 or approximately 17 percent of the federal budget. The budget not only goes to active war efforts that continue in places such as the Middle East but also to improve troop preparedness and pay the millions currently enlisted.
- Social Security: Social security comes entirely out of payroll taxes and interest on invested payroll. In 2017, over $950 billion went into the program to millions of beneficiaries. For years, this program has been in surplus with more money coming into the program than going out to recipients. However, in the next few decades, experts predict the surplus will quickly disappear.
- Heath Programs: With federal programs such as Medicare, Medicaid, and marketplace subsidies, it is no wonder that 26 percent of the budget goes to health insurance programs. Medicare takes up a large portion of that price tag and will either mostly increase in price or decrease in coverage over the next several years. According to a recent report from the Administration for Community Living, 1 in 5 Americans are expected to be over the age of 65 by 2040 and thereby eligible for Medicare coverage.
- Safety Net Programs: Programs the aid lower and middle-income families are also known as “safety net programs” and take up about 14 percent of the federal budget. These programs include food stamps, unemployment compensation, housing assistance, child care services, and financial aid for low-income families.
- The National Debt: The fact that the United States is in debt is not major news. Every few months, politicians begin talking about the budget, the deficit, and how we can start to balance the two. Part of that balance is through annual interest payments just like one would have on a loan. Currently, the country is over $21 trillion in debt. In 2016, the interest on our debt came out to approximately $240 billion.
Besides these top five, the budget goes to a wide variety of other vital areas of the government including education, infrastructure, transportation, scientific and medical research, and veteran affairs.
Overall, taxes are an inconvenient but necessary part of being a part of the American community. Knowing exactly where that money is going, however, is just as important as the taxpaying process.