Tax time is over for another year for millions of Americans (who didn’t ask for an extension), and as you look over your tax payments for calendar 2016, you’re undoubtedly wondering where those dollars are being spent by Uncle Sam.
The Wall Street Journal recently published a chart which breaks down spending for every $100 of tax receipts—and concludes that the U.S. government is actually a very large insurance company, that also happens to have an army. Chances are, the check or checks that you wrote for the year barely keep the government running for a fraction of a second.
For every $100 you pay in taxes, $23.61 goes to Social Security payments and administration—basically old age insurance for retirees. Another $15.26 goes to Medicare, the government health insurance program. Medicaid, the health insurance program for the poor, accounts for another $9.55 of that $100 tax bill—bringing the total costs for various civilian insurance programs to 48% of the total budget. And that army? It costs $15.24 of every $100 the government collects in taxes, not counting veterans benefits.
In all, the 2016 federal budget fell $15.24 out of every $100 short of revenues equaling expenses. Where would you cut?
Things like federal expenditures and grants for education ($2.08), food stamps ($1.89), affordable housing ($1.27) and foreign aid ($1.14) actually make up a very small part of the budget, smaller than interest payments on the national debt ($6.25).
There has been talk about helping reduce the budget by lowering expenditures on the National Endowments for the Arts and Humanities, which together represent eight tenths of one cent of that $100 tax bill. This would be comparable to someone trying to pay off his mortgage by looking for coins under the sofa cushions.
As for us, we’re just glad that we survived another very busy tax season, with more compliance requirements imposed on preparers and taxpayers than ever before. Tax simplification? Doesn’t seem to ever be in the cards.
If you would like to review your current investment portfolio or discuss any other tax or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first. If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.
The MoneyGeek thanks guest writer Bob Veres for his contribution to this post