What Your 2010 Tax Bill Really Paid For
Now that you've done your duty and paid your taxes (unless you need to file for a tax extension, that is), wouldn't it be nice to get a receipt showing you exactly what you paid for, just like at the grocery store? Well, this year you can -- there are a whole slew of online calculators breaking down exactly where your individual tax dollars are going, including one from the White House.
As the debate over the size and scope of our federal government begins to move to center stage, having a full grasp of where your money really goes becomes critically important. After all, opinions are good, but informed opinions are even better. And Washington is stepping up with a renewed effort to make abstract spending in the trillions more tangible by showing each of us how our own income tax gets doled out to various federal programs.
- The White House Tax App. The White House launched its online Your Federal Taxpayer Receipt calculator last week. Who knew 1600 Pennsylvania Ave. was a hotbed of web development? The tool spits out the actual dollar amount from your tax bill that went toward more than three dozen government programs. To get a truly personalized breakdown, you'll need to input your 2010 Social Security and Medicare payments, as well as the total income tax -- the sum of what you had withheld and any extra payment you ended up having to send in to settle your bill -- you paid for the year.
- Third Way's Calculator. The White House appears to owe a major hat tip to this D.C. think tank, which launched its own Your Federal Tax Receipt calculator a month ago. The Third Way calculator is a much deeper dive into government spending; in its "Expand All" view, you can see more than 300 specific line items of federal spending, from how much of your tax bill went to the Defense Department to pay for nuclear weapons maintenance and security, to your share of covering the salaries and benefits for members of Congress.
- The "Two Guys From Minnesota" Calculator. This one isn't from inside the Beltway, but it's actually the most impressive. The What We Pay For calculator ginned up by two Minnesota computer engineers does the best job of providing context for how our money gets spent by the federal government. All line items receive an icon to denote whether they are discretionary, mandatory, or an interest payment. And about those line-items: the calculator includes a comprehensive 134 pages worth. Honestly, I can't do it justice -- just go take a spin for yourself.
Congress Gets in on the Tax Receipt Act, Too
Last week, five House representatives introduced the "Taxpayer Receipt Act" which would require the IRS to send every taxpayer a one-page receipt breaking down how their taxes were spent, as well as a bold-face box showing the total federal debt and the per-person breakdown of that debt (actually the bill makes it clear they were talking about the breakdown per legal citizen). A similar bill was introduced in the Senate in March.
This sudden twist in spending transparency of course has a political purpose. Or maybe I should say an educational purpose. One clear goal of these initiatives is to help frame the debate about spending, budget cutting, and debt/deficit reduction based on facts, not rhetoric or unfounded assumptions.
For instance, a recent Gallup poll asked Americans what cuts to government spending they favored in light of the groaning federal debt and deficit. Foreign aid was the clear "winner," cited by nearly 6 in 10 poll respondents. And apparently the conventional wisdom is that there's plenty of savings to be had by going after this line item; a recent University of Maryland poll said that on average, Americans think foreign aid spending eats up 25 percent of the federal budget. But the calculators provide some valuable context. According to the White House calculator, which combines foreign development and humanitarian assistance, security assistance, and the cost of maintaining our embassies and general foreign affairs initiatives under the umbrella of "International Affairs," foreign aid eats up a whopping 1.7 percent of the federal budget. For a married couple with two kids and $80,000 in annual income, we're talking about $65.67 of their $9,983 tax bill last year going to foreign aid.
If you're looking for meaningful spending cuts, the calculators provide cold hard, personalized, numbers to ponder: Defense spending (26.3 percent in the White House calculator) and health care (24.3 percent, excluding what we all contribute to Medicare through the payroll tax) actually account for the biggest chunks of spending, not foreign aid.
What I'd love to see next is a new round of apps that delivers some easy-to-grasp context on the cost of current federal tax policy. You know, stuff like the fact that the government "spent" $1.1 trillion last year on itemized individual income deductions, and the impact of extending the Bush tax rates through 2012. That's the next round of "education" that would lead to more fact-based debate on the budget and our national debt.