compare to that in other advanced economies? How does the size of the government in the U.S. In contrast, over 70 percent of the payroll taxes were paid by people with annual incomes below $200,000. Seventy percent of the income taxes were paid by people with incomes above $200,000 per year. While the bottom half of earners contributed little to revenue in income taxes, they did contribute significantly in payroll taxes. The type of taxes paid varies a lot across the income distribution too. Within this top 20 percent, the top one percent of earners paid 26 percent of all federal taxes while receiving 16 percent of total pre-tax income, and the top 0.1 percent paid slightly more than 13 percent of all taxes and received a pre-tax income share of about 8 percent. In 2018, the top 20 percent of earners received 53 percent of all income before taxes and paid 68 percent of all federal taxes. Who pays the largest share of federal taxes? Most of that came from individual income taxes (49 percent) and the payroll taxes levied to finance Social Security and Medicare (35 percent).The remainder came from the corporate income tax (7 percent) and a hodgepodge of other taxes (9 percent) including the estate and gift taxes and taxes on alcohol, tobacco and firearms known as excise taxes. In 2018, federal revenues amounted to $3.3 trillion. Where does the government get all this money? Spending for education, training, employment, and social services also represents a relatively small share-just 3 percent -reflecting the fact that most public spending on education is at the state and local level. International affairs spending, which includes a wide range of activities from international development and humanitarian assistance to international military assistance, accounts for only 1 percent of all federal spending. The other half of discretionary spending includes everything from space exploration to salaries of folks who answer phones at the Internal Revenue Service: education and employment, transportation, veterans’ healthcare, administration of justice, and other programs as diverse as international affairs, FBI, and housing assistance. accounted for about 40 percent of world military spending. For example, during the 2001-2011 decade, the U.S. defense spending in 2017 was a smaller share of the world’s military spending than in previous years. economy is only about a fifth of the world economy. accounted for over a third of worldwide defense spending even though the U.S. defense spending exceeded that of the next seven countries combined. In 2017, the most recent year for which data is readily available, U.S. What about the discretionary spending? What does that include?Ībout half of discretionary spending goes to defense. This is more than what the federal government spent on unemployment benefits, higher education, food and nutrition assistance programs, and pollution control taken together. As a result, a sizable part of the budget goes to pay interest on that debt-in 2018, interest consumed almost 8 percent of all federal spending. The only previous experience with debt this high was at the end of World War II. This level of debt is very high by historical standards. The government has borrowed a lot: The federal debt held by the public amounted to slightly over $15 trillion by the end of 2018, a sum equivalent to roughly 76 percent of the U.S. And last but not least, a portion of mandatory spending goes to interest payments on the federal debt. “Other mandatory programs” include an array of much smaller programs that range from federal government and military retirees’ benefits to veterans’ pensions. Next up is Medicaid, the health care program for the poor run jointly by the state and federal governments, and income security programs like unemployment insurance and food stamps. Social Security and Medicare also provide benefits to disabled individuals and families of retired, disabled, and deceased workers. Social Security pays a monthly old-age benefit to those reaching retirement age (minimum 62), whereas Medicare pays for the health care expenses for those 65 and older. So what programs fall under mandatory spending?Ībout half of mandatory spending is spending on programs primarily aimed at the elderly. NASA then has to operate within that budget. For example, funding for National Aeronautics and Space Administration (NASA) is discretionary, which means that every year Congress decides how much federal money to authorize it to use-in 2018, $19.5 billion. Agencies cannot spend more than the sums appropriated by Congress. The other third of federal outlays, discretionary spending, is determined by Congress on an annual basis.
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