Taxes. We resent paying them, yet, for the most part, they do fund things most of us would rather not do without, such as schools, roads, firefighters, courts, and police.
It's natural to wonder what we're buying with our money. Now, in an effort to make our government operations more transparent, the White House has made it easy to get an answer to that question -- in essence, a receipt for where your tax dollars are spent.
Your "Tax Receipt"
At whitehouse.gov, you'll find a rich array of information, including daily schedules of the president and vice president. (On the day I wrote this article, I saw that the president was meeting with a group of evangelicals at 2:40 p.m. and with Defense Secretary Leon Panetta at 4:30 p.m.)
To get your personal tax receipt, click into "Issues," and then "Taxes," and you'll be able to calculate where your tax dollars go by entering how much you've paid in the past year in Social Security tax, Medicare tax, and income tax. If you don't have that info handy, you're offered some profiles of sample taxpayers.
What Do Mr. and Mrs. Smith and Their Two Offspring Pay?
Let's check out the results for a married couple, with two children, earning a total of $80,000. (The calculator notes that, "This assumes this family contributes 5% of their wage income to a 401(k) or IRA, does not itemize, and claims the Making Work Pay and Child Tax Credits.)
First off, they pay $4,960 in Social Security tax, which goes toward retirement and survivor benefits, as well as disability insurance. Medicare takes $1,160 to cover Medicare hospital insurance. Income taxes surprisingly total less than the family's Social Security bill: $3,863. Here's how those income tax is divvied up:
- National defense gets $1,016, or 26.3% of the total bill.
- Health care: $939 (24.3%).
- Job and family security: $846 (21.9%).
- Education and job training: $185 (4.8%).
- Veteran benefits: $158 (4.1%).
- Natural resources, energy, and environment: $81 (2.1%).
- International affairs: $66 (1.7%).
- Science, space, and technology programs: $46 (1.2%).
- Immigration, law enforcement, and justice: $77 (2%).
- Agriculture: $31 (0.8%).
- Community, area, and regional development: $19 (0.5%).
- Response to natural disasters: $15 (0.4%).
- Additional government programs: $93 (2.4%).
- Net interest: $286 (7.4%).
Digging Into the Details
Clearly, wars aren't cheap, with defense spending the nation's top category, eating up about a quarter of the Smiths' tax payment. This family pays nearly as much on health care, which also isn't surprising. Health care has been ballooning into an ever-bigger cost for employers, individuals, and the government alike. (The folks at Fidelity Investments, for example, have recently estimated that a 65-year-old couple can expect to spend, on average, about $230,000 on health care throughout retirement.)
Taking a little more than a fifth of that tax money is job and family security. Of that $846 bite, $170 goes to unemployment insurance; $139 goes to food and nutrition assistance; $85 goes to housing assistance; $135 goes to family-related tax credits; $178 goes to federal, military, and civilian employee retirement and disability; and $23 goes to child care, foster care, and adoption support. In a better economic environment, many of these expenses should shrink, but at the moment, these are challenging times for Americans.
Many items probably don't cost us as much as we think. If you sense that we spend too much on NASA, consider that it would receive just $27 of our hypothetical taxpayers' money. Of course, it's all relative -- consider that just $19 goes toward education, training and other benefits for veterans, or that $27 goes toward international development and humanitarian assistance.
Tweaking the Status Quo
Arming yourself with the facts on where your money goes can help you think about our national budget and how it might be improved. Many of the protesters occupying Wall Street and elsewhere, for example, are calling for more support for college students, such as the forgiveness of student loans. Well, once you know that a typical household spends around $31 of their tax dollars on college financial aid, it may not seem so reckless to imagine increasing that. A whopping 33% increase would only add $10 to the tax bill.
Last year, The New York Times offered an enlightening way to put government expenses into context and to see for ourselves how easy or hard it is to put our nation on firmer financial footing. Their "Budget Puzzle" presented projected budget shortfalls of $418 billion by 2015 and $1.3 trillion by 2030. Then it invited us to resolve those gaps via savings from tax increases or spending cuts, or a combination of the two. Cut foreign aid in half, and save $17 billion. Apply a 5.4% surtax on incomes above $1 million, and save $50 billion in 2015 and $95 billion in 2030.
Spend a little time with the puzzle, and you'll end up with a greater appreciation of how difficult it can be to balance competing needs and demands. You might then take action, letting your representatives in Washington know what changes you'd like them to support.
We're a nation of consumers, and if we're smart, we'll know exactly what we're getting for the hard-earned dollars we spend.
Longtime Motley Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio.