Where Does Tax Money Go and Why You Should Care?
After working hard for a week or two, you finally get to reap the benefits of your labor. You get paid. You're excited to get your paycheck at first, but then something happens. You realize they've taken 10 percent of your income for various taxes. It could hit hard if you're currently struggling to survive. It could also make you wonder, "Where does tax money go?"
We want to help you understand where all the money goes that gets taken out of your paycheck each pay cycle. Those taxes you pay do go somewhere, and you deserve to know where that is. Here's some information on taxes, why we pay them, and where the money goes after it leaves our paycheck:
The Various Taxes We Pay
Payroll taxes aren't the only taxes we have to pay in life. It might be easier to ask, "Where does tax money go?" and understand if payroll taxes were the only taxes we had to pay.
However, we also pay sales taxes every time we purchase certain items from the store.
Some of us also have to pay property taxes for our vehicles and our homes. It gets to be a little bit overwhelming over time.
Where does tax money go? All of the units of money from these various taxes take different paths after they leave our hands. It seems like such a mystery, doesn't it?
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Why We Pay Taxes?
Before we ask, "Where does tax money go?" we should probably try to understand why we need to pay them in the first place. We pay three different types of taxes: federal, local, and state taxes.
One reason we have to pay taxes is that it's a civil obligation.
The second reason we have to pay taxes is that it's the law. We would have issues with the Internal Revenue Service if we failed to pay taxes from our earnings.
Congress has the power to lay down the federal tax laws, as the Constitution gave them that authority. Most of the taxes come from the laws that congress made based on a bill that the president designed. State legislatures decide what state taxes to impose and how. Taxing authorities within local jurisdictions decide on the taxes that their residents will pay. Where does tax money go? All of these taxes get used for various purposes, which we'll discuss soon.
What to Do If You Don't Like the Taxes?
You can do something if you're not happy with the way taxes are set up. However, you'll have to take action with many other people if you want to see results. You can contact your Representatives and U.S. Senators to file complaints about the taxes. They may make changes if enough people complain, but there's no guarantee that that will happen. You have the right to ask them, "Where does tax money go?" as well.
Where Our Taxes Go?
The economy works in a circular motion. Tax money goes to the government entities, and the government entities circulate it to various outlets. Some of those outlets provide funding for programs that we need. Some of those outlets provide protection for our citizens. However, there are other areas that the money circulates to where it doesn't directly benefit the citizens. Here are some of the places that our tax monies go to when they leave us:
Government Debt Interest
Let's face it. Currently, the country is facing some serious debt issues. The U.S. has trillions of dollars in debts to various countries and organizations. If you know anything about debts, you know that they all carry interest. As the debts increase, the interest rate often increases, as well. That's where our tax dollars come in. We must pay taxes to help pay the interest on the debt that the country owes.
Entitlement Benefits
A huge chunk of the taxes we pay goes to programs that our people benefit from. The catch is that the government uses our money to fund such programs. Government entities usually refer to this as "mandatory spending." Examples of the types of programs that this mandatory spending supports are:
Social Security is a program that people can reap the benefits of when they reach their sixties. The benefit is supposed to supplement any retirement plans that such people have when they reach that point. Social Security checks can be as small as a few hundred dollars and as large as $3,895. The amount a person gets depends on how long that person has worked and the income that he or she earned during that period. All of us pay into the Social Security program each time we get a paycheck. There is no way around these taxes for most people. They're a fact of life for most workers, and there is no easy exemption from such taxes. Public workers, foreign workers, minor children workers, and religious group members can claim exemption from the taxes. Some people within these groups have to waive their rights to collect benefits, however.
Veterans receive certain benefits for serving our country in times of war and disaster. The list of benefits that such people receive include disability benefits, pensions, job training, and rehabilitation services. We must pay taxes to support these programs for the veterans, as well. It's our way of thanking them for the efforts they put into serving our country. Some of the money for veterans’ benefits comes from earned income taxes.
Medicaid is a beneficial health program that helps many of our people to receive the care they need. Medicaid assists low-income, pregnant, and disabled individuals who meet the income guidelines to receive the benefit. It also provides health benefits to the children. A huge chunk of taxes goes toward the Medicaid program, as well. The cost of Medicaid is currently split between state and federal governmental entities. We pay taxes to both entities. Thus, our tax dollars help to support Medicaid. Many states have opted not to offer citizens the expansion programs, which means that single non-pregnant and non-disabled individuals don't qualify if they earn too much money.
Medicare is a different healthcare program that our tax dollars support. The Medicare benefits are available to elderly persons as well as some disabled individuals. It also goes out to people who have end-stage renal disease and are waiting for a transplant. Medicare pays for hospital stays, medication, doctor's visits, and the like. There are four parts to the Medicare plan, and each of these parts cover a certain type of benefit for the receivers. You can speak to a specialist to learn more about the complexity of the Medicare program.
Some of our taxes go toward the earned income credit program. This program provides a refundable credit to low-income individuals at the end of the tax year. Such individuals can receive up to $5,828 if they have several children and no tax obligation. Many people benefit from the program, and our tax dollars do support it.
The child tax credit is a benefit that provides a credit of up to $2,000 to people who have children and meet the other requirements. This is also a refundable credit that can cause a taxpayer to receive a refund at the end of the year. We support this program, as well.
Discretionary Programs
The rest of the tax money goes into discretionary programs. The programs and spending are called "discretionary" because Congress can raise them or lower them at their discretion. They meet about these expenditures every year and decide how much money they're going to allocate into which program. Examples of such programs include:
Educational Programs
Some taxes go to education and educational programs. They pay the salary for our teachers. These taxes also go toward the grants people can get when they want to go to college. An example of such a grant is the Pell Grant. Many people have gotten opportunities to go to school that they may not have gotten otherwise because of the Pell Grants. These tax funds also go toward funding student loans. About 7 percent of discretionary spending goes into the educational category of expenses.
Health Programs
Our tax dollars also go toward funding health-related organizations. These organizations research diseases and mental health issues and tell us their findings. They also give us tips on how we can avoid becoming sick and handle various crises. Furthermore, they come up with remedies for illnesses. Examples of such organizations are the Centers for Disease Control and the Food and Drug Administration.
National Defense
The biggest portion of the discretionary spending goes to national defense. It makes up for 48 percent of such spending. Our tax dollars fund the Department of Defense and all of its equipment, workers, and operations. For example, we pay for our troops to go to war when the government decides it's time for war. Whether we like it or not, it's what our government chooses to do with the funds.
Transportation
Transportation is also an answer to the question, "Where does tax money go?" Tax dollars pay for the public buses that transport people to various areas in the country. They pay for vehicles, the fuel, and the repairs on the vehicles, as well. Taxes also pay for the trains and planes that transport citizens where they need to go. You may not have known this, but our tax dollars also pay for bridges, roads, and air traffic control. In fact, our taxes pay for the entire Department of Transportation. Essentially, we pay to have the means to get around. About 7 percent of the discretionary spending goes to the transportation expenses.
The Mystery of Taxes Has Been Solved
You no longer need to ask, "Where does tax money go?" Now you know exactly where your tax money goes every time it leaves your check. Consumers often debate about whether the tax system is flawed or not. It seems to work well for some and not for others. The truth is that it's our tax system whether we like it or not. However, you can maximize your credits and deductions during tax filing season and minimize your losses by becoming more educated about the tax system and how it works. That's where Goalry comes in. Goalry is a fairly new program of ours that we think you should consider.
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Master Your Taxes and Your Finances With Goalry
Did you ever wish that you could find all of the helpful personal finance information you needed in one place? Well, now you can. Goalry is a new app that uses the concept of a financial goal mall. If you've ever been to a mall, you know that they sometimes have multiple floors, and each floor has a set of "stores."
To gain access to the Goalry stores, you'll have to sign up on Goalry for a member ID. The member ID will give you access to all three floors in the financial mall. The first floor is the social community where you can meet other people who have the same needs that you do and might be able to offer assistance. The second floor contains places you can go for finance education. The third floor contains all the finance stores.
Signing up for Goalry is the first step toward financial wellness. It takes less than 30 seconds to do so, and you'll have immediate access to all the products and services you need for yourself. All you have to do is ask for help, and you will receive it. We're always here to help you get to where you need to be. Our finance stores can assist in areas such as taxes, credit, budgeting, debt, insurance, investing, and more. Not only can you find educational materials, but also you can find experts who can provide you with tax accounting services, credit restoration advice, and more.
With our Goalry program, you can now improve all areas of your personal finances instead of just improving one. We're a one-stop-shop for everything related to your money. Start taking advantage of the products and services we offer right away. You'll be surprised about what you can learn from our educational materials.