Where do our taxes go?
Federal Tax Spending
What are our taxes spent on?
If you are someone who has just been hired as an employee, or somebody who has worked like a dog for the past 15 days, or a concerned citizen, and you want to know why you have to pay taxes, then this is for you all. You might have wondered for a long time what exactly you are paying for. First you have to understand taxes, when and how you pay for it. Then you can now know where your taxes go to.
What are taxes?
Taxes are imposed charges by the state or the government to the taxpayers. Taxpayers would be citizens or corporations. Charges may be in the form of money or labor. Federal tax is imposed because it is not voluntary, but compulsory.
How do I pay my taxes?
The government has discovered a lot of ways to tax her taxpayers. It would actually depend on which government you are in and the type of taxpayer you are. If you are an employee, you are taxed according to your income. What you see in your pay slip is the income tax which means, taxes are automatically deducted from your monthly pay.
Other forms of paying tax for the non-employee, or if your work in your home, and nobody is exempted of, is value added tax. This federal tax is usually imposed on consumables, practically anything bought. Taxes are imposed on what you buy from the groceries, up to the gas you pumped to your car. No one is actually safe from paying taxes.
If you have properties, you also pay taxes like land tax, etc. When you put up your own business, or even just build a building, you have to pay license fees to the federal government which is also federal tax. There are a lot of other forms of paying taxes and a lot other kinds of taxes.
There is also federal tax credit imposed when the federal government deducts a certain amount to what you actually have to pay them in taxes. It is usually an incentive for investment, or as subsidy.
Why is there a tax refund?
People adept on taxation assume that you, an ordinary employee, can understand the things he or she mentions when they try to explain about taxes. It is never easy, really. Every month, an amount of your income is withheld as tax. Then at the end of the year or any duration of your job, the accountants or somebody who issues your payroll found out that the amount of tax withheld is more than the right amount of income tax that you should pay, and then you get a tax refund. Hope you got it.
Why do I have to file taxes?
Tax filing is usually scheduled by your government’s internal revenue department or bureau. A lot of things happen during tax filing. It depends if you have to file your annual income tax return or have to pay your dues. Consequently, taxpayers either have to pay or be refunded. If you as a taxpayer cannot comply within the scheduled date, then you may suffer interests, non-compliance fee or any additional charges from the federal government.
Why do I have to pay taxes?
This may be the question you just cannot wait to be answered. It’s too big a question to be answered. It actually depends on the kind of government you are in. Simply put, in order for the state to satisfy its responsibility to the citizens, it has to collect taxes. How the government appropriates it depend on the different agreements it has entered (including conditions for debt from international institutions) and on the political will of the government officials. Even the federal tax credit they issue would also depend on which and what kind of industries it encourages and wish to subsidize.
One may consider it a really basic question for any person who pays taxes, yet nobody would bother to ask if they see and know where their taxes go and is therefore satisfied by their government’s appropriation.
Where do my taxes go?
As mentioned, the answer depends on the type of government you are in. In welfare states such as United Kingdom, citizens have a bigger portion of income tax deducted. This is because social services such as health and education are also heavily subsidized by the government. Basically, your taxes would be appropriated to different government-ran institutions like schools, hospitals, and other agencies. But again, to further emphasize, where our taxes go depend on the different agreements or conditions entered upon by government.
For example, a decade ago, the government may have regulated oil prices and prevented fluctuation by allocating government budget from the taxes they have collected. Now, a number of governments may now have deregulated oil so they no longer allocate budget on regulating it. Another example is on social services like on education and health. Before, these institutions are heavily subsidized by governments. Currently, we may have seen on television the budget cuts on big universities around the world. Health institutions are no longer supported by taxes and become corporatized which allows income generation be a requirement for them to continue operation. These are part of the conditions for governments to continue to borrow money on big lending institutions since they see that internal revenue from taxes are not enough to fund the state’s needs. A big amount of our taxes actually go to debt servicing.
Another example is on tariffs. Tariffs are taxes imposed on any good that moves across political borders in order to discourage trade. Some bilateral trade agreements between countries may lower tariffs on the goods exchange between them. This is to further illustrate the effect of government to government agreements on taxation and allocation.
As a taxpayer, it would always be your responsibility not only to pay your taxes: the right amount and during the right time; but also to make sure that what you pay is properly allocated to what you need.
To find out more about where tax money is spent Click Here