The United States is projected to have revenues in 2007 of 2.54 trillion dollars. Where does this money come from, and where does it go? This is the question that this paper will answer. All figures will come from the Congressional Budgeting Office’s 2007 Budget.
Of the 2.54 trillion dollars that the Federal Government will collect, individual income taxes are projected to account for 1.247 trillion dollars of all revenues to the Federal Government. This figure stands at 49.09 percent of revenues. Income taxes are progressive, meaning that the more a person earns, the higher the tax rate for that person will be.
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Payroll taxes, Social Security and Medicare Part A, will add another 875 billion dollars to the Federal Government’s budget. This figure stands at 34.45 of Federal revenue. Payroll taxes partially fund the costs of Social Security and Medicare Part A, with the tax rate being 12.4 percent for Social Security, and 2.9 percent for Medicare Part A. On Payroll taxes, one half of the tax is paid by the employer, and the other half, or 7.65% of income, is paid by the individual. People who are self-employed pay both halves.
Corporate taxes comprise the third largest income block for the Federal Government. In 2007, an estimated 368 billion dollars will be paid by business’. The amount of tax due depends on the business’ profits during that year.
The fourth largest revenue source for the Federal Government is that of the excise tax. The excise tax is expected to collect 58.7 billion dollars for the Federal Government in the year 2007. The excise tax is a collection of five different taxes, the highway, alcohol, airport, tobacco, and other taxes. The highway tax is a tax on gasoline and diesel fuels, which comprises an estimated 37.3 billion dollars. The airport tax is a tax that is connected with airline tickets. The airport tax will collect an estimated 11.4 billion dollars. The alcohol tax is expected to raise another 9 billion dollars for the excise tax. Tobacco and other miscellaneous taxes 11.9 billion dollars over the course of 2007.
Customs, estate, and miscellaneous taxes comprise the other taxes that the Federal Government collects. These taxes are projected to add 97 billion dollars to the Federal Government.
During the 2007 budgeting cycle, net outlays stand at 2.8 billion dollars. Of all outlays, discretionary spending is that largest expenditure of the government set at 714.8 billion dollars. Discretionary spending include services to the poor, rail road retirement, children services, scientific research and development, justice, communications, labor, Indian affairs, agriculture, natural resources and environment, DHS, health, education/arts/humanities, transportation, commerce/consumers, and the general government.
The next largest expenditure of the government is on defense spending. Defense spending accounts for 625.2 billion dollars of the 2007 budget. Out of this figure, most of the five branches of the military are funded.
Social Security, with expenditures of 589.2 billion dollars is the next leading candidate for government funds. The Social Security is comprised of 2 parts, Old Age and Survivors Insurance as well as Disability Insurance. The Old Age and Survivors Insurance costs are projected to be 487.3 billion of the 589.2 billion dollars that Social Security receives. Disability Insurance captures the other 101.9 billion dollars.
Medicare and Medicaid comprise a net of 564 billion dollars of the Federal outlays. Medicare, which will receive 372.1 billion dollars of the 564 billion dollars of the Federal outlays to this category are for nearly all older people as well as people on Social Security Disability. Medicaid, however, will receive 191.9 billion dollars. Medicaid are for low-income Americans.
In the 2007 budgeting cycle, the Federal government had outlays of 239.2 billion dollars to pay net interest on publicly held debt. The Net Interest outlay is under the control of the Department of the Treasury that oversees the payments of net interest.
The Veterans Healthcare outlay has 77.6 billion dollars appropriated to it in 2007. Of that number, 38.6 billion dollars goes towards veterans compensation and pensions. Another 32.6 billion dollars goes towards veterans healthcare. The Veterans Healthcare outlay requires 2.7 billion dollars to run. Veteran life insurance has a budget of one billion dollars. Readjustment and employment of this outlay costs the government 2.6 billion dollars, whereas housing outlays for veterans constitute 154 million dollars. Other veteran benefits cost 2.4 billion dollars.
Military retirement and Healthcare outlay has funding of 51.5 billion dollars. Of that sum, 43.8 billion dollars is earmarked for retirement of veterans, and 7.7 billion dollars are earmarked for the healthcare costs of the veterans.
The last major outlay, International Affairs, has a budget of 36.4 billion dollars. Of this amount, 20.2 billion dollars goes toward international assistance. The Administration of Foreign Affairs has a budget of 7.6 billion dollars. Three point two billion dollars are earmarked for HIV/AIDS global initiative. International Peacekeeping managed to receive 2.3 billion dollars. International broadcasting received 646 million dollars, and the War on Drugs received 1.2 billion dollars.
As you can tell, the largest majority of federal inlays are collected via the individual income tax. The federal individual income tax helps cover the shortfalls of the payroll taxes, and go to the funding of the rest of the government’s outlays.
If increased deficit spending occurs over a long period of time, the Federal government will have to find a way to balance the Federal Budget. History has shown that raising the individual income tax rate does not generate sufficient inlays that will allow for budget balancing.