Did you pay enough taxes this year?
Thanks to the 2017 tax cut the typical American is now paying less in taxes than they were before this administration. Adding up the payroll and other taxes on earnings and income, the average American household pays more than $26,000 to the federal government each year. Ouch! Last year, Washington collected more than $3.3 trillion in taxes. And still we run a deficit and the debt continues to grow. It’s nice to have more money in your pocket. So where exactly does all that tax money go?
Many believe most of it goes to foreign aid and defense. That’s false. Others think corporate subsidies dominate the budget. That too is false. The truth is health entitlements, meaning Medicare, Medicaid, Obamacare, Social Security along with interest on the debt are both the largest and fastest growing areas of government spending. It is the responsibility of the U.S. Congress to keep the nation financially responsible. The strength and wellbeing of the nation depends on it.
Unless Congress takes ahold of the purse strings we will be bankrupt and weak soon. The four health entitlements programs and the ever-growing interest payments on the national debt will consume every dollar of taxes paid by 2041. Long before then money for other things will be gone. That will mean we will have less and less to spend on defense, food assistance, highways, housing environment or education. It would be better to think about this before it becomes a crisis. A better solution is more likely to be found when we take measured deliberate action to avoid crisis in the first place.
Where your taxes go
Social Security, the single largest federal program, accounts for roughly a quarter of all federal spending. It is broke today; its trust funds currently pay out more than they take. Its finances will continue to deteriorate faster as more and more boomers retire and fewer people pay into the system. The Social Security trustees project that unless Congress implements reforms, the program will run out of reserve funds by 2034. When that happens it would trigger a 23% cut in benefits.
Right now, Medicare, Medicaid, and Obamacare subsidies account for 28.8% of all federal spending. Ten years from now, they’re projected to gobble up more than a third of the budget.
Other income security programs such as veterans’ benefits, food and housing assistance, federal employee retirement, and disability account for 16% of the budget. That’s more than we spend on national defense.
At 15% of the federal budget, defense spending is the last major category of federal spending. The defense budget covers everything from military paychecks to operations overseas to the research, development, and acquisition of new technologies and equipment.
Currently, 8% of the budget goes to interest payments on this debt. Everything else the federal government spends money on combined comes to 9%.
Impacts of spending growth and debt service
Over the coming decade, U.S. debt is projected to balloon to nearly 93% of gross domestic product. But don’t blame that on “inadequate taxation.” We actually took in $9 billion more this year than the year before and that will grow with the economy. The issue here isn’t lack of tax revenue. The problem is non-existent spending control. The government no longer engages in a budget process. That spending is driven primarily by increases in health and Social Security outlays. The long-term consequences of deficit spending are dire.
Economic growth slows in countries as debts increase. As the debt increases, so does the cost of the interest to service the debt. Left unchecked, growing government spending and historically high levels of debt will ultimately require higher taxes. Just raising taxes on the rich won’t meet the need. Paying for Big Government requires high taxes on everyone. If the dollars go to the government and debt service they are removed from household budgets and the standard of living goes down. That’s what is coming if we fail to act.
Rising debt will leave lawmakers with few options to avoid a default. Unless we change course it is only a matter of time before every American will be forced to pay higher income and payroll taxes. So, be thankful for the extra money the 2017 tax cuts put in your pocket. But understand that unless we insist that our lawmakers suppress their appetite to spend, we could all soon be paying much, much more. Shouldn’t we say enough? Let’s quit trying to stick the next generations with our tab.
Daily Signal By: Justin Bogie & Adam Michel @ April 14, 2019