Tax season is a time of year that most Americans dread. It’s something that requires a significant amount of effort to do correctly, and the idea that if you do it wrong that you’ll be heavily penalized by the IRS makes the task stressful. It doesn’t help that the majority of Americans are uneducated on what their lost tax dollars do. Taxes are just a necessary chore that all Americans participate in together every spring, without really understanding what their money is going towards.
Although the exact amount per dollar that goes to different causes differs slightly per year, each year the percentages are roughly the same, differing by a few cents one way or the other.
Where do my taxes really go?
The easiest way to envision this is to imagine your paid taxes as a single dollar. Although we all pay much more than $1 every year in both federal and state taxes, the easiest way to look at it is to simplify it to a small dollar amount.
One dollar in federal taxes gets divided up as follows(as of 2015):
28.7 cents – Health
25.4 cents – The Pentagon
13.7 cents – Interest on Federal Debt
8 cents – Unemployment and Labor
5.9 cents – Veterans Benefits
4.6 cents – Food and Agriculture
3.6 cents – Education
2.9 cents – Government
1.9 cents – Housing and Community
1.6 cents – Energy and Environment
1.5 cents – International Affairs
1.2 cents – Transportation
1..1 cents – Science
Over the past few years, these numbers haven’t changed very much, and so you should expect your 2016 tax dollars to be spent about the same. However, due to the recent change in presidency, it’s very possible that these numbers could drastically change when you file your taxes next year.
State vs Federal taxes
The above figures are a representation of how your federal tax dollars will be spent. However, your individual states’ taxes will differ dramatically. In Utah, we have a single personal income tax, which is a flat rate of 5%. According to the tax foundation, the total income tax collections averages to $833 per person. Utah ranks 23rd highest in the country for state income tax.
Although paying your taxes may always be a daunting task, it helps to understand where your tax dollar is actually going. Ignorance may be bliss, but a lack of ignorance makes things a lot less confusing.