Visual Guide to Where Your Federal Taxes Go

Here's an interesting little visual that puts the USA budget in a little persective. Though I have a lot of respect for fiscal conservatives (I consider myself leaning to the right fiscally), I find it interesting that when the current teabagging crowd complain about taxes, they usually don't target the two biggest pieces of the pie: military (Nat. Defense + Nat. Security Discretionary = 1.1 trillion) and retirement (social security + medicare + medicaid = 1.2 trillion). Together, this makes up over 2/3 of the entire budget. Instead, you often hear complaints about the National Endowment of the Arts or the National Science Foundation, etc. which are drops in the bucket comparatively. So if you think we should lower taxes (and assuming you also want to lower spending), what would you cut?

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Wow I didn't realize what a big chunk of change the Military got.

If it was up to me to cut something, I would cut the social security tax. Every week $50-60 is taken out of my paycheck for this, and in the end it is said that my generation (I'm 21) will not even get to reap the benefits as it will be "dried up". It is a failing system, especially when you get people like the Octomom and god knows how many others exploiting it so early on.

If you are a hard working individual and responsible spender/saver, you should not have to rely on this to make your ends meet when the time comes for retirement. 644 Billion is a HELL of a lot of money that could be used elsewhere.

If not cut it, lower it.

I agree.

I don't like looking at those charts. It never gets easier year after year.

Really, what do you cut? Cutting Social Security means that people who already have paid into it all their lives don't get the benefit that some of them really need. Cutting military spending has the unfortunate side effect of cutting non-military American jobs. That money actually gets spent, and in peacetime, generally is spent on R&D and pure labor, rather than major material costs. Next biggest items are Health and Human Services and the Department of Transportation. Not only are both tiny in comparison to the rest, but they're the sort of essential functions that we're generally happy that the government provides.

What should happen is that the money that is taken away from our paychecks now is invested in those mutual funds that get more conservative as we get older, instead of passed along to people who are old now. By the time we're old, all the money that we were forced to invest in the stock market will be worth something.

Edit: Just mathed it out. If you were forced to invest at the amount Kharvik says he pays into social security (I have no idea if the numbers are right, I dont really pay attention...), $200 a month, starting at age 20, the funds would be more aggressive, so lets say it follows the stockmarket and gets 8% a year on average (a conservative estimate), at age 55 the investments would be worth well over $400,000. Since retirement is approaching, your investments should get safer, so lets say for the next 10 years you're in bonds and get 5% a year. By the time you're 65, you'd have a bit over $700,000. Nice start to retirement savings, eh?

Well, the way social security works is that current taxpayers pay to fund the current retirees. That's why social security is considered unsustainable. When the baby boomers retire (and they're starting to), the burden will be left on the current taxpayers (whose numbers have suddenly dwindled) to fund those ever growing SSI paychecks. Part of the problem of putting funds in a 'lockbox' to invest in the stock market is that would be money not being used to fund the current SSI burden so we'd end up paying even more.

And the old people who invested in technology stocks in the 90's or invested in anything and think they're going to retire in the next five years go without cash? Those on disability get jobs as work-at-home telemarketers? I know that you're only being half serious here, but still, bad plan.

You'd obviously have to phase it in somehow. The people close to retirement wouldn't be affected at all. Today's young will still be paying for today's older for a while, and gradually the age at which you start investing for yourself would get younger, until everyone is forced to invest for themselves. But the way we're doing it now isn't sustainable. People funding themselves would be incredibly expensive for the government in the short term, but in the long term, it doesn't break the government

We could definitely phase out the social security tax. The fact is this is yet another bubble in America just waiting to burst, and if nothing is done soon it's going to be ugly and leave a lot of people screwed over.

A lot of people already invest for their retirement in a regulated manner, given that the SSI benefits are actually pretty paltry. These accounts tend to be 401(k), 403( b ), or IRA type situations and much like everything else, boy did those types of accounts take a beating this year.

What happens to the people using your plan when the stock market tanks?

As I said, the last 10 years, the investments get more conservative - bonds, maybe CDs. Anyone in the stock market this year who needed the money in the next 5 years made an error. You should never, ever, ever be in the market with money you need in the near future.

Also, the recession is great for investing. I'm buying index funds for the same price that they were when I was 10, and I suspect that the market will quickly recover once it gets started. Even if it just goes the average of 8-10% over the next 3 decades (figures that include the great depression), I'm happy.

That is not how a 401(k) works.

Its how mine works. Even so, I'm not saying that you'd be forced to invest through a 401(k) plan, because the government (probably) isn't your direct employer

Yeah, I really love growing up and having all of my teachers tell the classes 'well, with the way things are going, you guys probably won't be retiring when you grow up'.

That said, I did see the military numbers coming. Having several friends in the military, and having several friends who are part of military families, they're pretty darn well off. Very secure, loads of benefits, all you have to deal with is the occasional redeployment (losing a friend to Hawaii at the end of this year, /sniffle).

Wait, wait, I know! We'll cut the Social Security tax and pay for it with deficit spending and we'll pay for it for the rest of our lives anyways!

Social Security is a huge tax with moderate retirement benefits. Anyone with half a brain is investing for themselves, but 1) sometimes retirement income goes away, and 2) Social Security is not just retirement. There needs to be a safety net out there for the extreme cases. A restructuring of Social Security would be far better than phasing out the benefits.

Both of those are pretty major points. Let's say you worked for Enron for thirty-five years and was told by your employer that you had a substantial, defined-benefit pension that was enough to live on even in the face of the stock market crashes from the 90's. It wasn't the retirement you hoped for, but it was enough. Oh, wait, that's gone too. Sucks to be you? Not cool. Instead, you live out the rest of your life in poverty, but you have enough to survive.

Then you've got the people who lose a limb to farm machinery, fall off a ladder and end up paralyzed working as a self-employed painter, or catch some life-altering disease like MS and become incapable of working at an unusually early age. What're they going to invest? What chance did they have to save? Social Security gives them enough to live just above the poverty line.

Ahem.

You said teabagging. Heh. Heh.
Sorry, that's all I got. Carry on.

Also, more education cuts =

Edit: Though I wonder what this 'American Competitiveness Initiative' is all about.