The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Thursday, April 10, 2014

Center On Budget And Policy Priorities: Federal Tax Dollars

Re-Blog w/permission from the CBPP

Center on Budget and Policy Priorities

Policy Basics:
Where Do Our Federal Tax Dollars Go?

The federal government collects taxes to finance various public services. As policymakers and citizens weigh key decisions about revenues and expenditures, it is instructive to examine what the government does with the money it collects.
In fiscal year 2013, the federal government spent $3.5 trillion, amounting to 21 percent of the nation’s Gross Domestic Product, or the total value of goods and services that a country produces in a year. Of that $3.5 trillion, nearly $2.8 trillion was financed by federal revenues. The remaining amount ($680 billion) was financed by borrowing; this deficit will ultimately be paid for by future taxpayers. As the graph shows, three major areas of spending each make up about one-fifth of the budget.

Policy Basics:
Where Do Federal Tax Revenues Come From?

The three main sources of federal tax revenue are individual income taxes, payroll taxes, and corporate income taxes; other sources of tax revenue include excise taxes, the estate tax, and other taxes and fees.
Over recent decades, the share of federal revenues coming from individual income plus payroll taxes has grown, while the share coming from corporate taxes and other revenues has fallen. The Great Recession — one of the worst economic downturns since the Great Depression — and the policies enacted to combat it, including temporary tax cuts, depressed federal revenues below the typical levels of recent decades. Revenues fell from 17.9 percent of gross domestic product in 2007 (the last fiscal year before the recession) to 14.6 percent in 2009 and 2010. In 2013 they were 16.7 percent. As the economy recovers, federal revenues are projected to return to higher levels.

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