It’s important to first understand how much a common starting salary pays in taxes. But then where does it go?
Answer: Health Insurance, Social Security, Defense
- Are you surprised by the top 3 categories the Federal government spends taxpayer money on? Explain.
- How would you adjust the spending allocation across these categories (if at all)? Why?
- What top three items do you think the government will spend tax dollars on in ten years? Why?
Behind the numbers (CBPP):
“In the fiscal year 2022, the federal government is estimated to spend $5.8 trillion, amounting to 23.5 percent of the nation’s gross domestic product (GDP). Of that $5.8 trillion, over $4.8 trillion is estimated to be financed by federal revenues. The remaining amount will be financed by net borrowing. As the chart below shows, three major areas of spending make up the majority of the budget:
- Social Security: In 2022, 21 percent of the budget, or $1.2 trillion, will be paid for Social Security, which will provide monthly retirement benefits averaging $1,538 to 49 million retired workers. Social Security also expects to provide benefits to 3 million spouses and children of retired workers, 6 million surviving children and spouses of deceased workers, and 9 million disabled workers and their eligible dependents.
- Health insurance: Four health insurance programs — Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and Affordable Care Act (ACA) marketplace health insurance subsidies — together account for 25 percent of the budget in 2022, or $1.4 trillion. One-half of this amount, or $733 billion, goes to Medicare, which provides health coverage to around 80 million people who are aged 65 and older or have disabilities. The rest of this category funds the federal costs of Medicaid, CHIP, and ACA subsidy and marketplace costs. (Both Medicaid and CHIP require states to pay some of their total costs.) In a typical month, Medicaid and CHIP provide health care or long-term care to about 87 million low-income children, parents, elderly people, and people with disabilities . In 2022, 13 million of the 14.5 million people estimated to be enrolled in health insurance through ACA marketplaces received subsidies that lower their premiums and out-of-pocket costs, at an estimated cost of about $82 billion.
- Defense: Another 13 percent of the budget, or $768 billion, will be paid for national defense activities. About 95 percent of the spending in this category reflects the underlying costs of the Defense Department, largely for operations and maintenance; military personnel; procurement of weapons; and research, development, testing, and evaluation.”
Taxes on the mind? Check out NGPF’s Taxes unit page which is full of ideas to engage your students!
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