Why Must We Pay Taxes?

Taxes are the one thing everyone has to pay. Those taxes go to pay for government services at the federal, state, and municipal levels. Diego Ruiz Duran, a prominent International lawyer says, “Unfortunately, most people feel like the money they pay into the system goes into a black hole.

Federal Taxes

The federal government receives trillions of dollars each year. 50% of that comes from individual income taxes that are taken out every payday. A third comes from Payroll taxes, another income tax. Corporations only pay 7% in taxes, and the rest comes from tariffs, estate taxes, excise taxes, and federal reserve investments.


Diego Ruiz Duran also told us that Federal taxes are not the only tax we pay. Every state collects trillions of dollars each year in taxes. States also receive sales tax which amounts to about 20% of their tax income. Hospitals, Universities, and toll road fees add another 20% to the state income. Of course, only about 2.3% of these taxes come from corporate income. The lower corporate taxes are because states try to attract companies and offer more jobs.

Local Taxes

This local tax is an additional tax that goes to the city, school district, and county. Most of this revenue comes from intergovernmental transfers and aid. They also add tax to water, sewage. They have parking meter income, which adds another 23% to local government income. Property taxes amount to 30% of the local government income, and business licenses offer a 2% to the total.

How Is The Money Spent

Unfortunately, most of us feel like the money we contribute goes into a black hole. But here is a basic listing of what happens to the tax money.

Social Security

Approximately $5 trillion goes into paying Social Security recipients. Most of these funds come from Payroll taxes and investments by the Social Security Trust Fund.

The next biggest expense is Medicare at $722 billion. Payroll also partially covers this expense.

National Defense

The Federal government spends a ton of money on military and defense needs. Currently, the government budgets about $760 billion a year for these expenses. This money also goes to areas like the Department of Veterans Affairs and Homeland Security. In most cases, we don’t really know what the benefits are because we don’t see them.

National Debt

It seems like we keep paying interest on debt. The amount continues to grow because Congress has a deficit in its budget. The interest on this debt runs in the billions of dollars.

Other government agencies require a total of $700 billion, the largest of these services being Health and Human Services at close to $100 billion, and the Department of Education at $67 billion. These areas are enormous and often go beyond their budgets, whereas other agencies like NASA are much smaller and only spend about $20 billion.

Who Decides Where The Money Goes

Elected officials in Congress decide how taxes are spent. If you don’t like where your money goes, then an option is to contact your state representative and let them know. The Constitution gives Congress the power to collect and decide where to spend taxes.