[ad_1]
Update: The IRS deadline for filing taxes is April 18th, 2023. This applies to most taxpayers. Those that request an extension will have until October 16th, 2023 to file.
The federal government spent a total of $6.3 trillion from October 2021 through September 2022, according to the U.S. Treasury Department’s Combined Statement of Receipts, Outlays and Balances of the United States Government report. That obviously sounds like a lot, but how much is it really, and what is the government spending all those tax dollars on?
The total GDP for 2021 was not released as of early 2023. However, for comparison, the total national GDP for 2020 was $21.49 trillion. The spending figure for just part of 2021 is equivalent to around 32% of the total GDP for 2020. GDP, or gross domestic product, is the value of all the goods and services provided or made within the country during that year.
What funds the things the government pays for? Well, $3.58 trillion of that 2021 spending was paid for by individual income taxes and Medicare/Social Security withholdings. Other sources of revenue included corporate income taxes, estate and gift taxes, excise taxes, and customs duties.
If you want to know what things taxes pay for, discover 10 categories of taxes below that account for a lot of the federal government spending.
In This Piece:
- Government Debt
- Social Security
- Medicare
- Other Health Care
- National Defense
- Veterans Benefits
- Safety Net Programs
- Education
- Infrastructure
- Salaries and Wages
1. Government Debt
In 2020, the United States borrowed around $3.4 trillion.
According to the Peter G. Peterson Foundation, which keeps a daily national debt clock, as of February 16, 2023, the national debt was as much as $31,457,017,567,000—more than $31.4 trillion. Not sure exactly how much that really is? Consider this—if everyone in the United States covered an equal portion of that debt, each person would need to pony up $94,264.
So, it’s not surprising that a large chunk of what the federal government spends goes to debt.
2. Social Security
Funding the Social Security program is a big expense for federal taxpayers. Social Security spending is part of an overall government spending category known as mandatory spending. These programs don’t require appropriation because the spending is mandated by a previous law or appropriation. With mandatory spending, the government funds the programs based on the need—however many people are eligible for and withdraw from Social Security, for example, determines how much is funded.
Many of the mandatory spending programs started in the middle of the 20th century. As the population has grown, so has the amount needed to fund these programs. Social Security accounts for the largest amount of mandatory spending.
3. Medicare
Medicare also represents a mandatory spending item on the federal budget. It’s typically second to Social Security. According to the Centers for Medicare and Medicaid Services, the federal government spent $900.8 billion on Medicare in 2021. That’s an increase of 8.4% over the previous year and accounts for around a fifth of the National Health Expenditure for that year.
4. Other Health Care
Medicare isn’t the only health care and wellness program covered by the federal government. Others include Medicaid, which the federal government funds in partnership with the states, the Children’s Health Insurance Program, and health care market subsidies. These subsidies are funded under the Affordable Care Act and usually taken as a reduction on how much someone might pay in taxes. In 2021, Medicaid costs were $734 billion.
5. National Defense
Defense is not included in mandatory spending. It is discretionary spending and must be included in congressional appropriations bills annually.
Defense tends to be the biggest discretionary spending item on the federal budget. Some, but not all, foreign aid can be classified under defense because that spending is meant to stabilize other nations for the defense of the United States.
In 2020, defense accounted for $800.67 billion in discretionary spending.
6. Veterans Benefits
Veterans benefits refers to a wide range of health and wellness programs, financial assistance, and other programs designed to support veterans of the U.S. military. This type of spending can actually fall under both discretionary and mandatory, as there are VA programs in both categories. In either case, though, it’s a relatively small percentage of total spending.
7. Income Security or Safety Net Programs
Income security refers to federal spending on safety net programs to increase the health and safety of the general population. Programs included under, but not limited to this umbrella term, are housing assistance, nutrition and food assistance, unemployment compensation, foster care, and certain tax credits. With COVID relief acts and other spending to support public safety and economic growth since the pandemic, this amount has increased. In 2020, it was $79 billion.
8. Education
The children are our future—but you might not know it by looking at how federal funds are spent. Education is normally a relatively small discretionary spending item—in 2020, it accounted for only 11.7% of total discretionary spending, and it often includes both K-12 education and spending on college, training, and employment services. It’s also worth noting that only some public school spending across the country is federal. The rest is covered by state and local funds.
9. Infrastructure
Infrastructure refers to physical structures and facilities we depend on to function as a society. This includes buildings, roads, and power supplies. As with education, infrastructure expenses are shared among federal, state, and local budgets.
10. Salaries and Wages
Not including the military and other non-civilian workforces, the federal government employs more than 2.85 million people as of 2021. That’s a lot of people to pay, which means one of the things taxes pay for is their salaries, wages, and benefits. The federal government spends billions of tax dollars to cover these expenses every year.
What If You Don’t Agree with Federal Spending?
As much as we’d sometimes like to pull the plug on our own tax bills because we don’t agree with how the federal government is spending our money, you still need to pay your taxes. Not doing so has legal consequences and could also lead to debt that might derail your financial goals and credit score. Here’s what you can do:
- Contact your legislators. Find your representatives in the House of Representatives and the Senate and contact them about your concerns. Don’t forget to contact your state representatives as well as your U.S. representatives.
- Use your vote. Vote for candidates for president, the House of Representatives or the Senate who align most closely with your policy beliefs and who may be more likely to spend money in a way you agree with.
- Get involved. Learn more, get involved with grassroots change efforts or sign or create petitions for change.
But while you’re doing all those things, don’t forget to file your federal taxes.
Article updated. Originally published May 17th, 2021.
The post 10 Things Taxes Pay For: Where Do Your Federal Tax Dollars Go? appeared first on Credit.com.
[ad_2]
Source link