March 28, 2017
Where did your tax dollars go? Look at our 2016 Tax Receipt.
The federal budget is roughly $4.2 trillion, and the vast majority of that - more than 80 percent - comes from payroll and income taxes we pay as individuals.1
While we may be a divided country in almost other every respect, our respect for taxes actually brings us together: 94 percent of Americans agree that paying your fair share of taxes is a civic duty.2
That’s incredibly strong agreement: in fact, more Americans agree that it’s important to pay your taxes than agree that we’re divided as a nation.3 Maybe there’s hope for us, yet.
How do you feel about your local food bank? Does your city have Meals on Wheels? Are there good schools? Do the potholes get fixed? Is there a good hospital nearby?
While they may not be run by the federal government, all of these things depend in part on federal spending to thrive. And all make our communities healthier, happier, and stronger.
In 2014, local and state governments received more than $600 billion in federal funding. About $66 billion of that went directly to city governments. On average, 30 percent of a state’s budget, and 22 percent of a city’s budget, will come from the federal government.4 Our cities and states couldn’t easily replace those funds.
Out of every tax dollar you (and your neighbors) pay, 29¢ goes to health care, and 23¢ goes to the military.
The health care portion of your tax dollar is split almost equally between Medicare (11.4¢) and Medicaid (12.4¢). The Children’s Health Insurance Program accounts for just 0.5¢ of every tax dollar - half a penny.
According to the most recent data for 2016, Medicaid covered more than 68 million people during the month of December (more people would be covered throughout the full year). The Children’s Health Insurance Program (CHIP) covered more than 5.5 million children. Medicaid also covers millions of children – in 2016, children accounted for half of enrollment in Medicaid and CHIP.5
In 2015, Medicare covered more than 55 million adults.6 In 2014, 38 percent of Medicare financing came from the government’s general revenues – taxes paid by individuals and corporations and other sources.7 Your income taxes fund Medicare parts B and D, which includes Medicare-covered doctor visits, lab tests, and prescriptions. The rest of Medicare, or 62 percent, is covered by dedicated payroll taxes and by beneficiaries themselves.
To learn more about where your tax dollar goes – from nuclear weapons to renewable energy to the National Endowment for the Arts- visit our tax receipt.
Of every dollar you pay in income taxes, 23¢ goes to the military – but only 5¢ supports our troops.
An additional 6¢ supports our veterans by providing health care, disability payments, and benefits for families of deceased soldiers.
Altogether, that means 11¢ of each tax dollar goes to our current and former military for their service, while 18¢ goes to maintaining the military and procuring weapons and supplies.
Corporations contribute only about 11 percent of federal revenues – and many profitable corporations use tax loopholes to pay nothing at all.
Over an eight year period, out of 258 profitable Fortune 500 companies, 100 of them managed to pay nothing in federal taxes in one or more years. Eighteen companies -- including General Electric, Priceline.com and PG&E – paid nothing for all eight years despite making a profit every year.
In all, the 258 profitable corporations used legal loopholes to pay an average tax rate of 21.2 percent – far lower than the 35 percent official corporate rate.8
While many of the biggest tax breaks in our system benefit the one percent or corporations, some tax breaks benefit working families.
Families earning up to $75,000 can benefit from the Earned Income Tax Break. In 2014, the Earned Income Tax credit provided families with nearly $68 billion in tax breaks. And $58 billion of that was “refundable” – meaning the government actually made payments to working families beyond just a tax refund. In all, 28 million taxpayers – about one in five -- benefited from the Earned Income Tax credit. The average benefit was $2,399.
Other tax credits help working families, too. The Child Tax Credit helped more than 22 million taxpayers, providing an average credit (or money back from the taxes you pay) of $1,211 per taxpayer. 9
Our progressive tax code is designed so that the more money you make, the higher percentage you pay in taxes (unless you don’t, since many high earners receive more tax breaks than their middle income peers).
Today’s highest tax rate for the wealthiest Americans is 39.6 percent, but there’s nothing magic about this number. If you go back to just the 1960s, 70s or 80s, the top tax rate was much higher – between 50 and 91 percent. Only in 1987 did it come down below fifty percent. 10
Even a small change in the top tax rate, of a few percent, can make a big difference in how much the federal government brings in – and that revenue can be used for anything from health care, to the military, to reducing the deficit.
Footnotes
