Verily : Where The Money Goes : by Wil C. Fry

Where The Money Goes

2015.04.11

2020.07.07

Taxes, Social Safety Net, Poverty

I saw this on Facebook yesterday:

“Hate” is a pretty strong word. As with most hate, the problem here is lack of knowledge/familiarity. The writer (a close family member) assumed the reason income taxes are so high is because so many people are drawing government assistance — welfare, food stamps, unemployment, etc., when they could be working. So I responded with some numbers on government spending, which I obtained from several sites, but mostly this one.

The federal government spends different amounts of money each year, and the percentages change, but the differences usually are not significant. Projected spending for the federal government in 2015 is just a hair under $4 trillion. That’s nearly $600 for every single human on the planet.

The money is divided into major categories:

I. Mandatory Spending — 65% ($2.5 trillion)
II. Discretionary Spending — 29% ($1.1 trillion)
III. Interest on the Debt — 6% ($0.2 trillion)

The largest subcategory of government spending I could find is “Medicare and Health”, which accounts for $999 billion, and Social Security is next at $900 billion. Together, those forms of “government assistance” add up to $1.9 trillion, right at half of all government spending. The next biggest chunk of spending is on “defense” — the military, at $640 billion. Going down the list, the next largest expenditure is paying interest on the national debt, which is $252 billion.

So, where is “could be working but choos[ing] to live off of government assistance” in all of this?

Federal spending on “food assistance” is marked at $106 billion, or just 2.7% of the total, and unemployment accounts for $47 billion (1.2%). Together, these two account for less than 4% of federal government expenditures, and therefore a very small percentage of anyone’s income taxes.

Further, just because someone’s on food stamps doesn’t mean they aren’t working or aren’t looking for a job. Nearly half of all food stamp recipients are in households that have income. In fact, with some exceptions, it’s required that applicants to SNAP “register for work, accept an offer of suitable work, and take part in an employment and training program to which they will be referred by the SNAP office.”

There is also evidence that fraud has significantly decreased in the SNAP program, and is now at less than 1%. The government actively investigates and prosecutes what little fraud they find.

A CPA works on a client’s taxes

So, food stamps are often supplementary to a household’s income, not in place of it. The food assistance and unemployment money that goes to people not working is temporary assistance to people with no other income — people who would otherwise starve, become homeless, or both. Almost none of it is going to “people who could be working but choose to live off government assistance”.

The tiny percentage of your income taxes that go to these two programs ($153 billion) is less than what we annually spend on the debt’s interest, less than what we annually provide corporations in tax breaks ($180 billion), twelve times less than what we spend on Social Security and Medicare, and four times less than what we spend on the military.

Let’s say that this year you had to pay $1,000 back to the IRS after filing your taxes. Less than $40 of that went to families in need, and only $20 or so went to people who weren’t actually working. Of that $20, only about 20 cents’ worth went to someone who was defrauding the system. That’s a small price to pay to make sure that people in need get the food they need and a little assistance to keep their lights on and water running.

Helpful table:

	U.S. Spending	Tax Owed*
total $ amount	$3.9 trillion	$1,000
Medical/Health	$999 billion	$256
Social Security	$900 billion	$231
Military	$640 billion	$164
Interest on Debt	$252 billion	$65
Food assistance	$106 billion	$27
Education	$72 billion	$18
Housing	$61 billion	$16
Unemployment	$47 billion	$12
International affairs	$38 billion	$10
Energy/environment	$38 billion	$10
Transportation	$26 billion	$7
OTHER	$721 billion	$184
*An example amount of someone owing $1,000 at tax time

So, if you’re frustrated that you had to pay in this tax season instead of getting some back, I hope the numbers above will help redirect or calm your frustration. Yes, the tax system is complicated. I’m convinced we could get by with a simpler tax code. But the amount of money we pay in is dictated somewhat by how much the country spends, and both amounts are controlled by Congress, not the IRS.

Comments From Original URL:

Richard R. Barron, 2015.04.12, 23:07:07

1. Complaining about the IRS or the “lazy poor people” is just another way of blaming someone else for your own inadequacy.

2. I don't like it when blogs or social media sites blur out the identities of those we discuss. They owned it when they posted it, so why shouldn’t they own it when you call them out on it?

3. We spend that huge amount on “health and medical” because we are a fundamentally unhealthy people. At the center of that, which goes back to point 1, is that we love money and possessions more than life itself.

Wil C. Fry, 2015.04.13, 09:24:24, in reply to Richard Barron

1. Yes. Though the tax system itself can be wildly unfair.

For example, when I was making minimum wage, I consistently paid a higher rate of income tax than I do now, when I’m solidly in the middle of the middle class. As I noted near the in my final paragraph above, these tax laws weren’t made by the IRS, but by the greedbuckets we elect to Congress.

2. I blurred the identity mainly because it’s an endemic complaint common to millions. I didn’t intend to refute a single person, but the idea itself. (Also, this specific one was not posted publicly, but to “friends” only; I’m the one making it public.)

3. Partly, yes, but also because our hospitals/doctors are among the most expensive in the world, even for the exact same treatments/drugs/machines/advice. In the U.S., we (apparently) believe the primary purpose of medical corporations is profit, with actual healthcare being a pleasant side-effect.