It’s April 15, and undoubtedly many Americans are rushing to the post office to mail their returns to the IRS. The rise of e-filing and the increasing use of return preparers and TurboTax has significantly reduced last-minute traffic, but the United States always has its share of procrastinators, meaning that local news reports will probably still show long lines of people waiting to get their returns postmarked on time.
The media pays a great deal of attention to taxes on April 15, but most of the reports overstate the importance of tax protest movements or discuss the onerous burden of filing an annual return. A rare story might highlight what taxes pay for, but despite the best efforts of progressives to link taxes and popular government programs, most taxpayers are still skeptical. One problem is that people don’t really know what is in the federal budget.
The White House website has a taxpayer receipt feature that shows where income tax revenue is spent. Almost 25 percent of income taxes pay for defense. Healthcare spending other than Medicare hospital insurance (which is 100 percent funded by FICA taxes) takes up 22 percent, while retirement, disability, and welfare programs come in at 17 percent. The national debt uses 8 percent of income tax revenue for interest payments. If you want to know how Medicare and Social Security fit into the puzzle, you’ll need your specific tax payment information, or you can use one of the preset categories. A family of four with an income of $80,000 pays about $9,100 in total taxes, and Social Security and Medicare make up less than 50 percent of that amount.
While the public is aware that defense spending is the largest category in the federal budget, people aren’t that good at estimating where the rest of their taxes go. Respondents in a 2011 CNN survey thought that education spending made up 10 percent of the budget (it’s actually 2.7 percent), foreign aid 10 percent (0.6 percent), and PBS 5 percent (0.01 percent). This isn’t really breaking news. U.S. taxpayers always seem to overestimate the federal role in education spending and the costs of foreign aid and public broadcasting. The latter misconception can be traced to Republican efforts to demonize spending as wasteful. PBS gets a lot of attention in speeches, but it doesn’t really affect the deficit.
The sequester debate caused a lot of lawmakers to moan about harsh defense cuts. But even after $46 billion in sequester cuts, the U.S. defense budget will still be around $600 billion this year (the White House actually proposed $527 billion, but that hides some costs). That’s over a third of the entire world’s defense spending. That’s right: Total world defense spending is $1.75 trillion. Russia spends only $90 billion annually on defense. China comes in at $166 billion (31 percent of Obama’s request). Is it really necessary for the United States to spend exponentially more on defense than its rivals combined?
Tax day is a good time to reflect on the U.S. tax system, which is straining to meet the government’s revenue needs. It’s also a good time for taxpayers to think about where their money goes. The government spends an enormous amount of taxes on weapons, military operations, and military personnel. Is that spending really necessary? Or, more importantly, is it so necessary that the rest of the federal budget must be drastically cut in order to outspend the world’s top 10 defense budgets combined? While Republicans are right to focus on entitlement reform as a necessary long-term fiscal priority, it’s time for the defense budget to be subject to that same level of scrutiny. Taxpayers just might prefer spending a bit more on healthcare over buying another fleet of supercarriers ($13.6 billion each) or more advanced tactical fighters ($137 million each).