Economics

Taxpayer Money: Contrary to Popular Belief

 

Have you ever heard people say: “Death and taxes are the two certainties of life”? People love to complain about paying taxes. The idea of the government taking one’s hard earned money from their hands can sometimes evoke a visceral response. But where does this tax money go? What’s the point of handing all this money over to the government? Simply put, taxes raise revenue to fund a functional government. Historically, tax revenue has been used for roads and public transportation, sanitation, public safety, education, health care systems, the military, public works, scientific research, and much more. Most of us cannot go a day without taking advantage of government provided products and services. If you drive on the highway, take the local bus or train to work, ever have the need to call 911, went to public high school, have gotten a vaccination, or flush the toilet and wash your hands afterwards when you use the restroom, you most likely utilized a government product or service.

ss-and-medicareIn fiscal year 2015, the federal budget was $3.8 trillion[i]. Federal spending goes into three categories: mandatory spending, discretionary spending, and interest on the debt. They account for all of the government services and programs upon which we rely. Mandatory spending and discretionary spending made up approximately 94% of federal spending in 2015[i]. Mandatory spending refers to spending that Congress legislates outside of the annual appropriations process, usually less than once a year. Social Security and Medicare largely made up, about 87%, of the $2.45 trillion mandatory spending in 2015[i]. The eligibility rules change for most mandatory spending programs, like Social Security, so the amount of money spent each year is contingent upon how many are eligible. Discretionary spending is the portion of the budget that is decided by Congress through the annual appropriations process each year. Interest on the national debt is the interest the government pays on its accumulated debt subtracted by the interest income the government receives for the assets it owns.

congressAs previously mentioned, discretionary spending is determined by Congress through the annual appropriations process. There are 12 appropriations subcommittees in Congress including Energy and Water, Defense, Homeland Security, State and Foreign operations, Interior and Environment, and many more. In 2015, Congress distributed $1.11 trillion towards discretionary spending[i]. Of that $1.11 trillion, only 2.6% of that, or $29 billion, was allocated towards Unemployment and Labor programs[i]. By a large margin, the biggest category of that $1.11 trillion went into military programs, $598.5 billion to be exact, or 54% of the discretionary budget[i]. To add context, world military spending in 2013 totaled $1.7 trillion, and the US accounted for 37% of that total (the US only accounts for 4.4% of the world’s population)[ii]. US military spending is around the same size of the next nine largest military budgets around the globe, including China, Russia, Germany, France, the UK, and others.

So much of the discretionary budget being spent on military leads to a significantly smaller piece of the pie left for the rest of government spending. For example, federal discretionary spending for veteran’s benefits, health, and education was only about 6% for each category of budget in 2015[i]. The total amount of spending for those three categories: about $199 billion[i]. What about other incredibly impactful and critical national programs in housing and the community, energy and the environment, science, and transportation? Total spending for these four categories: around $158 billion[i]. Total spending in all seven of these categories, $357 billion, is still remarkably short of the $598.5 billion solely spent on the Pentagon[i].

Aerial View of the Pentagon in Virginia

Aerial View of the Pentagon in Virginia

Working in Washington, DC last summer personally opened my eyes to the crumbling infrastructure our nation’s capital and the rest of the country continues to face. Old, outdated buildings, pothole-stricken roads, and traffic jams in the dead heat of July lasting long enough to melt my backside into the seat of my car were only some of the many experiences I endured which made me wonder where all of our tax money was going. Wouldn’t it only make sense to invest a larger portion of tax revenue into our nation’s roads, bridges, schools, and other public buildings? Perhaps it allows us to incorporate green and sustainable technology and engineering designs given the climate crisis we face. It addresses the desperate need for new infrastructure, creates millions of jobs nationwide, offers an opportunity to combat climate change, and provides a supplement of convenience and added benefits for all.

On the other hand, there will always be those who absolutely despise paying taxes, and believe what’s theirs is theirs, and no one else’s. That kind of thinking is reactionary, archaic and undermines the social contract upon which democracy is built. The next time you pay taxes, or listen to others complain about paying taxes, I encourage you to reflect on the words of the prominent former Union soldier and Supreme Court Justice, Oliver Wendell Holmes Jr., who once said, “I like to pay taxes. With them, I buy civilization.”[iii]

 

[i] https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

 

[ii] https://www.nationalpriorities.org/campaigns/us-military-spending-vs-world/

 

[iii] http://www.goodreads.com/author/show/432185.Oliver_Wendell_Holmes_Jr_

 

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