Tax & Spending Explorer (2024)

FAQs

What is the government taxing and spending? ›

In the United States, Article I, Section 8 of the Constitution gives Congress the power to "lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States. This is also referred to as the "Taxing and Spending Clause."

Nearly half of mandatory spending in 2022 was for Social Security and other income support programs such as the Child Tax Credit, food and nutrition assistance, and federal employee benefits (figure 3). Most of the remainder paid for the two major government health programs, Medicare and Medicaid.

Every year, Congress decides the amount and the type of discretionary spending, as well as provides resources for mandatory spending. Money for federal spending primarily comes from government tax collection and borrowing.

In practice, except for refundable tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), tax expenditures primarily benefit the top 20% of households. That's why tax expenditures have often been referred to as “welfare for the upper middle class.”

The $34 trillion gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself. Learn more about different ways to measure our national debt.

Most include a combination of deep spending cuts and tax increases to bend the debt curve. Cutting spending. Most comprehensive proposals to rein in the debt include major cuts to spending on entitlement programs and defense.

The federal government funds a variety of programs and services that support the American public. The government also spends money on interest it has incurred on outstanding federal debt, including Treasury notes and bonds.

The primary sources of revenue for the U.S. government are individual and corporate taxes, and taxes that are dedicated to funding Social Security and Medicare. This revenue is used to fund a variety of goods, programs, and services to support the American public and pay interest incurred from borrowing.

CBO: U.S. Federal spending and revenue components for fiscal year 2023. Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.

Of every dollar taxpayers pay in income taxes, 24¢ goes to the military – but only 4.8¢ goes to our troops in the form of pay, housing allowances and other benefits (excluding healthcare). Out of the 24¢ on the dollar that taxpayers contribute to military spending, 12¢ goes to military contractors.

Who is the creator of taxes? ›

About 5,000 years ago, we see the first record of taxation in ancient Egypt, where the Pharaoh collected a tax equivalent to 20 percent of all grain harvests.

Roughly 14 percent of the budget provides assistance to families and individuals in need. This includes refundable tax credits, Supplemental Security Income, Supplemental Nutritional Assistance Program (SNAP), low-income housing and school meals.

Overall, out of the 58 million taxable households that pay no income taxes some 56 percent of African American households pay no income taxes, while 40 percent of Asian American households and White American households do not. Of the 14 million non-filers, Hispanics make up 12 percent of the total.

Be Super-Rich. Finally, it's quite easy to pay no income taxes if you're extremely rich. In our tax system, money is only subject to income tax when it is earned or when an asset is sold at a profit. You don't have to pay income taxes on the appreciation of assets like real estate or stocks until you sell them.

Although most Americans believe the middle class bears the heaviest tax burden, it's actually the top 1% who pay the highest federal tax rate, at 25.9%, the Tax Foundation analysis found.

Article I, Section 8, Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; . . .

Federal tax and spending policies can affect the economy through their impact on federal borrowing, private demand for goods and services, people's incentives to work and save, and federal investment, as well as through other channels.

Taxes are mandatory contributions levied on individuals or corporations by a government entity—whether local, regional, or national. Tax revenues finance government activities, including public works and services such as roads and schools, or programs such as Social Security and Medicare.

"Tax and spend" is a term used in politics meaning government policy to increase or collect taxes for the purpose of increasing public spending.