You have completed, signed and sent in your income tax returns and you may be pondering this question: How does the government spend my tax dollars? Where does most of the money go? Does the bulk of my taxes go to pay for schools? Roads? The war in Iraq?
Those are daunting questions, considering all levels of government, federal, state, and local spent $4.1 trillion during 2007. Approximately two-thirds of your taxes go to the federal government, with the remaining third going to state and local governments.
Using data from the U.S. Commerce Department’s Bureau of Economic Analysis, MSNBC.com crunched the numbers to calculate how your taxes are spent.
The largest chunk of tax dollars, 22 percent, goes toward income security that includes Social Security, welfare, disability payments and unemployment insurance. The next-largest expenditure, 20 percent, goes for health care that includes Medicaid and Medicare. A significant 42 percent of American tax dollars is spent on entitlement programs.
Public safety, including national defense and local police, fire, prison and court costs make up another 20 percent of taxes.
Then comes education. About 74 percent of taxes spent on education goes toward elementary and secondary schools, with most of the rest paying for colleges, and the remainder for public libraries. Overall, education accounts for 16 percent of your tax dollar.
Since government doesn’t pay taxes, someone has to pay for the cost of government and that, of course, is you. When government spends more than it generates in revenue (sound familiar, Wisconsinites?) and resorts to credit card budgeting by borrowing money, there is interest that must be paid. The cost of managing all levels of government takes up another 14 percent of tax dollars, with the largest portion (63 percent) being the interest paid on borrowing. Other government costs include salaries, expenses and the cost of actually collecting taxes.
That leaves 8 percent of taxes that goes to pay for roads, agriculture, airports, air and water quality, the space program and recreation.
Let’s review how American tax dollars are spent according to the U.S. Commerce Department’s Bureau of Economic Analysis:
- Income security: 22 percent
- Health care: 20 percent
- National defense/public safety: 20 percent
- Education: 16 percent
- Cost of running government: 14 percent
- Miscellaneous: 8 percent
Finally, who pays what in taxes in America?
A 2007 report by the non-partisan Tax Foundation in Washington D.C. reported: “In general, households that earn the most income pay the most dollars of taxes. This is no surprise, since income and payroll taxes make up a very large portion of the nation’s tax bill. Overall, the most tax dollars were paid by households in the top income group. They paid an average of $81,933 in taxes – $57,512 to the federal government in Washington in 2004 and $24,421 to state and local governments at home. Households in the middle income group – which some refer to as the ‘middle class’ – paid an average of $21,194 in taxes, or $13,028 in federal taxes and $8,166 in state and local taxes. America’s lowest-earning households – those earning less than $23,700 in cash money income in 2004 – face the nation’s lowest tax burden. Households in the bottom income group paid an average of $4,325 in taxes in 2004, or $1,684 to the federal government and $2,642 to state and local governments."
Taxes at all levels of government remain too high, severely impairing income growth, job creation and retention.
The best way to get a handle on taxes is to curtail runaway spending.
State Sen. Mary Lazich (R-New Berlin) represents Wisconsin’s 28th Senate District.
