Where Do Your Taxes Go?
April 15 has always been known as “Tax Day” in the United States. Each year, millions of Americans scramble to get their taxes done in time to file them with the Internal Revenue Service (IRS) on that day. Some people do their own taxes or have an accountant or other person do their taxes for them. There are plenty of options of tax software to use in the comfort of your home as well, such as Turbo Tax. However, there is probably a question lingering in the minds of many Americans: Where do your taxes go? Of course, when you receive a paycheck from your job, there are taxes automatically taken out of it. There are a variety of areas that make up where the taxes go, including:
Health Care Expenses: Expenses toward health care make up the largest part of the taxes that are deducted from your salary. It is broken down into different categories of Medicare, Medicaid and CHIP (Children’s Health Insurance Program). These deductions go toward the welfare of low income individuals, children and the disabled so that they can be covered by health insurance through those plans. Social Security: Every single working person pays toward their own Social Security, which is money that goes toward older individuals, the disabled, retired workers and their dependents. Defense and International Security Assistance: There is money deducted from paychecks that go toward the security of the country during times of international crisis, such as during the war in Iraq and Afghanistan. Safety Net Programs: Tax money taken here goes toward important programs to help people with unemployment insurance, food and housing assistance.
Interest on the Debt: This tax amount comes to only six percent. Remainder: The rest of your tax dollars go toward other programs related to benefiting veteran and federal retirees, food and drug safety, transportation and education.
With a progressive tax system, individuals with higher salaries are responsible for paying a larger percentage of taxes. It is generally broken down in this manner:
The top 20 percent income earners pay an average of 27.2 percent toward federal taxes. This includes payroll, estate and corporate taxes. Incomes within the top one percent pay an average of 35.5 percent toward taxes. Incomes in the middle 20 percent, with the average salary ranging at around $46,000, pay around 13.8 percent on average toward taxes. Incomes within the bottom 20 percent technically don’t pay federal taxes because they will receive a credit and receive payments from the government.This tax season, you will no longer have to wonder where your taxes go. Keep these breakdowns in mind while you are preparing your taxes or having an accountant prepare them.
William Doonan is a tax law and legal expert.