March 29, 1997 in Nation/World

Do You Know Where Your Taxes Are Going? Before You Complain, Take A Look At The Facts

Steven Thomma Knight-Ridder
 

It’s almost April 15 - Do you know where your tax money is?

As Americans put the finishing touches on their annual tax returns to the federal government, most don’t know what they get for their money.

The fact is, your money is all over the world.

Some of it is in the Social Security check sent every month to that retired woman down the street, and some of it is in the paycheck of a young soldier guarding the Korean border.

Some of it is in the interest on the savings bond your niece got for graduation, and some of it is in the check sent to the neighborhood doctor who cares for the elderly.

But how much? Are you spending more on programs you like and less on programs you don’t like, or just the opposite?

Americans tend to overestimate government spending on unpopular activities, such as foreign aid or welfare, and underestimate spending on popular programs, such as Medicare. Their misunderstanding makes it harder for politicians to pursue the kind of cuts that will be necessary to balance the budget without tax increases.

A majority of Americans, for instance, thinks the government spends more of their money on foreign aid than on Medicare, according to a poll last year for the Washington Post. The truth is that Medicare is near the top of the spending list, taking 12 cents out of every dollar sent to Washington. Foreign aid is near the bottom, taking less than a penny of every dollar.

A plurality, about 48 percent, overstate how much is spent on welfare, believing it takes at least 20 cents of every dollar spent by the government, according to a 1995 poll for CBS and The New York Times. In reality, payments to welfare families accounts for about 1 cent of every dollar. If other programs for the poor and near-poor are included - such as Medicaid and food stamps - the figure rises to about 12 cents.

Part of the problem stems from politicians eager to blame budget problems on easy, often-faceless enemies like fraud and waste or “welfare queens” who rip off the system, said Stan Collender, a budget analyst at the public relations firm Burson-Marsteller.

“People are misinformed because they were misinformed,” Collender said.

Also, he said, many Americans tune out accurate news about their government.

“People get their news watching Entertainment Tonight,” he said. “Unless Madonna does a show about the budget, most people aren’t going to pay attention to it.”

Madonna or not, here’s a quick breakdown of where each federal dollar is being spent this year:

Social Security takes 23 cents;

National defense takes 16 cents;

Interest on the national debt takes 15 cents;

Medicare, medical care for the elderly, takes 12 cents;

Medicaid, medical care for the poor and the elderly in nursing homes, takes 6 cents;

Cash and food assistance to the poor takes 6 cents.

All of the rest of the government takes the remaining 22 cents, including 3 cents for education and training, 2 cents for transportation, 1 cent for the environment and parks, 1 cent for foreign aid and foreign operations; 1 cent for agriculture; 1 cent for space, science and technology; and 1 cent for law enforcement.

Of course, not all of that dollar comes from you. Your money isn’t enough to pay for all the government services, so the government borrows about 7.5 cents of every dollar it spends.

Living in a country that is aging and at peace means your money is spent very differently than it was 10 or 20 years ago.

“Defense has really plummeted,” said Steven Gold, associate director of the Tax Foundation, a research group. “Social Security, health and medical costs have gone up dramatically.”

Unchecked growth would mean a dramatic change in how much you have to send in to Washington, something that hasn’t really changed that much over the last 40 years.

Despite election-year rhetoric from pandering politicians, the overall federal tax bite hasn’t changed much in recent decades.

All federal taxes took about 20.4 percent of the nation’s entire economy in 1995, virtually the same as the 20.3 percent rate at the start of Richard Nixon’s presidency in 1969 and the 20.2 percent rate at the start of Ronald Reagan’s term in 1981.

In fact, the individual income-tax takes about 8.5 percent of the economy, lower than the 9.6 percent in 1969 and comparable to the 7.8 percent in 1959.

The surprising changes have come in business taxes and payroll taxes. Business taxes have dropped steadily from a total of 6.9 percent in 1959 to a total of 3.9 percent in 1995.

At the same time, the tax taken out of your payroll check for Social Security and Medicare has jumped from 3.1 percent in 1959 to 8.1 percent in 1995. It now rivals or surpasses income taxes for three-quarters of Americans.

But if the overall taxes have stayed relatively constant for decades, the lack of knowledge about today’s budget could send tomorrow’s taxes soaring, critics warn.

Ignorance has consequences. As long as great numbers of Americans believe that the federal government can balance its budget by cutting unpopular programs like foreign aid, they will never support the kind of cuts in popular programs like Social Security or Medicare.

“The average voter gets angry at the messenger who says we must cut, and we get politicians who are afraid to do anything,” said Collender.

And if they don’t do anything to rein in the growth of popular social programs, they’ll grow so large that they will not only take up virtually every penny of your tax dollars, they will require more and more of those tax dollars.

At the rate those programs are growing, a child born this year would have to pay 84 percent of his or her lifetime earnings over to the federal government, said Demetri Coupounas, policy director of the Concord Coalition, a bipartisan group prodding the government to balance its budget.

“That,” said Coupounas, “would lead to anarchy and chaos.”

Or at least would lead people to know where their money was.


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