Want to know where your tax dollars go? Use the taxpayer receipt

February 9, 2013 at 3:48 pm in News by Dustin Siggins 12 Comments

taxreceipt

When it comes to federal spending, it is an unfortunate fact that most Americans do not know what dollars go where. Tea Party Patriots recently highlighted the Top 9 places our tax dollars are spent, and the Treasury Department has a more comprehensive list on Page 40 of this report, but getting this information out to the majority of Americans is difficult.

Two years ago, the think tank Third Way may have come up with a worthwhile solution: a “taxpayer receipt.” From an op-ed published in March 2011 about the potential importance of such a receipt:

According to a recent University of Maryland poll, Americans on average believe that one-fourth of all federal spending goes to foreign aid. With a tax receipt, a typical middle-class family with an income of $50,000 and $6,883 in federal income taxes and payroll taxes would see that, in reality, only $42.80, or 0.6 percent, of their taxes go to foreign aid.

Polling from Third Way, a center-left think tank, has shown that three-quarters of the electorate believes that the budget deficit can be tamed without touching Social Security or Medicare. With the receipt, that same typical taxpayer would see that the nation’s two largest entitlement programs account for $2,180.48 of his or her annual tax bill. (This amount is different from the payroll taxes that person would see on a pay stub. The receipt would show the cost of those two programs as a proportion of the federal budget.) By itself, a receipt wouldn’t suggest solutions. But it would ground the political debate in hard numbers.

The latest version of the receipt on Third Way’s website is outdated by now – its calculations are based upon tax rates relevant in the 2011 tax year – but let’s see how things look, with an assumption of $50,000 in income at the average tax rate of 17.4% of income. At this income level, a person would pay $8,700 in taxes. Here is how that $8,700 breaks down, according to Third Way:

 

Social Security 20.3% $1,764.71
Defense 20.2% $1,754.36
Medicare 13.5% $1,172.94
Low-income assistance 9.2% $796.17
Medicaid 7.6% $663.93
Net interest payments 7.4% $642.95
Veterans Affairs 3.5% $306.45
Unemployment compensation 3.4% $293.37
Law enforcement and homeland security 2.4% $205.26
Transportation 2.1% $186.94
Education 2.0% $176.41
Health (not Medicare and Medicaid) 2.0% $171.12
Environmental protection and natural resources 1.0% $82.86
Managing federal employees and buildings 0.9% $81.45
Agriculture 0.7% $62.88
Space and science 0.7% $59.80
Foreign aid 0.6% $52.30
Social services 0.5% $45.74
Housing and community planning 0.5% $45.70
Workplace safety and rights 0.5% $41.98
Internal Revenue Service (IRS) 0.4% $38.19
Diplomacy and embassies 0.4% $33.09
Energy 0.4% $32.71
Trade and economic development 0.3% $26.71
Telecommunications 0.3% $26.03
Native Americans 0.2% $19.70
Statistics and weather 0.2% $17.89
Congress 0.1% $11.06
Arts and culture 0.1% $6.02
District of Columbia 0.0% $2.95
Post Office 0.0% $2.19
White House 0.0% $1.00
Bailouts, currency & financial regulation -1.4% -$124.85
Your Total: $8,700.00
The total national debt (as of January 1, 2012): $15,222,940,045,451
Your share of the national debt (all legal residents): $50,958
Change in your share of the national debt in 2011: +$2,576

Of course, one can take issue with how Third Way defines various aspects of the federal budget. Medicaid isn’t defined as “low-income assistance” in their receipt, for example, and I suspect they are only accounting for interest payments made on publicly held debt, since interest payments in the federal budget for all debt totaled 12.5% of the budget in 2011, not 7 percent. Despite these concerns, I think the benefits of this receipt would be tremendous for educating all Americans on the real breakdown of the budget in terms of how much each person pays in taxes.

Of course, as with any suggestion like this, cost is a major question. The 2011 op-ed offers an answer:

The cost of producing this receipt would be a relative bargain. We estimate that the IRS would have to spend about $15 million to mail the receipts to taxpayers. (Two of three households file electronically, so their e-receipts wouldn’t cost much to send.) There would be some costs associated with maintaining the Web site, but that’s a small investment for a very worthy goal: clearing up confusion about the federal budget.

What do you think, Patriots? Is the receipt a worthwhile investment for the federal government? Or will the cost rise above the benefit of telling each American exactly how much money he or she paid into each part of the federal budget?

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