As another tax day arrives, Americans are surely wondering where their hard-earned federal taxes go.This year, Washington will spend a staggering $35,148 per household and collect $26,677 per household in taxes. The resulting budget deficit of $8,471 per household will bring the total national debt to $177,000 per household.Federal spending has soared nearly $7,000 per household since 2007 and is projected to rise another $7,000 over the next decade (all numbers in this article are adjusted for inflation). Unless spending is reined in, tax increases must eventually result.
The Breakdown
All families have their own level of taxation and distribution of benefits. Yet, using the national averages, Washington will spend this year’s $35,148 per household as follows:
Social Security/Medicare: $13,178. The 15.3 percent payroll tax, split evenly between the employer and employee, covers most of Social Security's and a small portion of Medicare's costs. The typical couple retiring today will receive Social Security benefits 13 percent higher than their lifetime contributions, and Medicare benefits that are triple their lifetime contributions into the system, even after adjusting for inflation and net present values.
As 74 million retiring baby boomers are added to this fragile system, paying all promised benefits would eventually require raising the payroll tax to 33 percent, or imposing a 34 percent value-added tax (basically, a national sales tax).
The Breakdown
All families have their own level of taxation and distribution of benefits. Yet, using the national averages, Washington will spend this year’s $35,148 per household as follows:
Social Security/Medicare: $13,178. The 15.3 percent payroll tax, split evenly between the employer and employee, covers most of Social Security's and a small portion of Medicare's costs. The typical couple retiring today will receive Social Security benefits 13 percent higher than their lifetime contributions, and Medicare benefits that are triple their lifetime contributions into the system, even after adjusting for inflation and net present values.
As 74 million retiring baby boomers are added to this fragile system, paying all promised benefits would eventually require raising the payroll tax to 33 percent, or imposing a 34 percent value-added tax (basically, a national sales tax).
Internal Revenue Service DC by Joshua Doubek is licensed under Wikimedia Commons Creative Commons Attribution-Share Alike 3.0 Unported license.
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