Tuesday, April 15, 2014

Here’s Where Your Tax Dollars Go - The Daily Beast

Here’s Where Your Tax Dollars Go - The Daily Beast

Here’s Where Your Tax Dollars Go

It’s the $2.8 trillion-dollar question on Tax Day: Where—exactly—does my money go?
By CNBC’s John Schoen.

It’s the $2.8 trillion-dollar question many people ponder when they write that check payable to the U.S. Treasury. Where does all that money come from? And where—exactly—does my money go?
If you have trouble balancing your checkbook, imagine trying to keep track of where $2.8 trillion goes every year. Even with armies of government accountants and auditors, it’s hard to know with certainty exactly where each dollar of your income taxes ends up.
What you will find when you look is a lot of very big numbers. To scale them down to what your budget looks like, here’s—roughly—how the federal government spent your money last year: Assuming you made $1,000 a week (which is about the median U.S. household income), the three biggest consumers of your money were Social Security and health care—each of which ate up about $230 of your $1,000 weekly paycheck. (Health-care spending includes Medicare and Medicaid; Social Security includes both so-called On-Budget and Off-Budget, but we’ll leave the whole “lockbox” thing for another day.)
Next up is military spending, which includes everything from salaries for the troops to new ships and fighter jets. That ate up about $160 of your $1,000—a smaller piece of the pie than last year.
The Treasury Department—which is in charge of collecting and accounting for all this money—takes about $100 for itself. The biggest chunk of that goes to pay interest on the national debt.
After that the numbers start to get (relatively) smaller. Which is a good thing: You've got about $250 left to pay the rest of the government’s expenses. The list includes Agriculture ($42 of your initial $1,000), Veterans Affairs ($37) and the Office of Personnel Management—the government’s HR Dept. ($23). Next up are the departments of Labor ($22), Transportation ($21), Homeland Security, Civil Defense ($15), Housing and Urban Development ($15) and Education ($11).
That gets us into single digits the Departments of Justice ($8), Energy ($7), State ($7), Interior $3) and Commerce ($2). Last year, some $2 per $1,000 was spent by the National Science Foundation and on to general science and basic research. Another $5.50 went to pay for the space program.
And while some readers complain about seeing their tax dollars going to fund aid to other countries, it’s not a big number. Last year, $5.33 per thousand went to pay for international assistance.
Not all of that money came from your incomes taxes, by the way. Last year, individual income taxes paid about $1.3 trillion of the $3.5 trillion in federal spending, while corporations paid $274 billion. The rest comes from Social Security taxes from both individual and employers ($887 billion); excises taxes ($84 billion); unemployment insurance ($57 billion); and other taxes. The Federal Reserve also kicked in $76 billion from the interest it earned on all the debt it’s been snapping up since the 2008 financial crisis. (The rest was paid for with $680 billion in borrowed money.)
Your tax bill varies widely depending on which state you live in. Residents of Connecticut, with the second-highest per capita income, had the biggest federal tax liability—$13,672 per return, for the 2011 tax year, the latest data available. (Mississippi, with $4,228, was the lowest.)
But as your accountant will tell you, the tax code offers hundreds of ways to reduce that liability with deductions, exemptions, credits and other IRS voodoo.
There must be some good tax accounts in the Nutmeg State, because they found the most deductions per return of any state. Even with those deductions, Connecticut taxpayers with the highest federal tax paid ($7,038 per return).
But Uncle Sam isn’t the only government entity looking for a check. Tax rates vary widely—from a 12.9 percent rate in New York to just 6.9 percent in Wyoming. That doesn’t include local taxes.
Mississippi residents paid the least in combined state and local taxes in 2011—just $2,620 per person, according to the Tax Foundation.
The highest? Once again, Connecticut takes the prize—at $7,150 in state and local taxes paid per person.

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