We'd like to thank Audible for supporting PBS Digital Studios. Do you remember the very first job you ever had? Maybe it was busing tables, bagging groceries, or working as a lifeguard.
You put in your hours, keeping track of how much you expected to make, and when that first paycheck arrived, you opened it up and... Surprise! federal income tax.
The first one is essentially a federal insurance program for the elderly and helps pay for retirement and medical programs for older Americans. Income tax rates have varied wildly throughout history. Before 1913, they were actually forbidden by the U.S.
Constitution, thanks 16th Amendment. As recently as 1981, the top tax rate was 70% for singles earning over $108,300. And the highest rate on record was in 1945 with a top rate of 94% for the ultra wealthy. Now these days tax rates aren't quite so high, but no matter how much the federal government takes from your paycheck, you should know what it's being spent on.
Have you ever stopped to figure out exactly what is being bought with that money you send to Washington each year? I think it's time to... Run the Numbers! This is Tabitha. She works in HR and made $40,000 in 2017. After exemptions and deductions, her taxable income is $29,600, placing her in the 15% marginal tax bracket.
Tabitha lives in a state of poverty. with no state income tax. So at the end of the year, she ended up paying $7,038 in federal taxes. Nearly half goes to Social Security and Medicare.
These taxes, known as payroll taxes, are spent on health insurance and income. for the disabled and people in retirement, like Tabitha's grandparents. Gram-Gram and Pa-Pa paid their FICA taxes when they were Tabitha's age, and now they're enjoying the benefits just like Tabitha will someday.
That leaves $3,978 of Tabitha's federal income tax left to be spent. The largest chunk of your federal income tax goes to medical programs that help low-income families, like Medicaid and CHIP. That means that, including FICA, almost 60% of Tabitha's income tax is spent on medical programs.
Tabitha's federal taxes are basically going towards insurance programs. $930 of Tabitha's salary supports men and women enlisted in the armed forces. Plus, it pays for fighter jets, submarines, and Pentagon staff. Tabitha may not realize it, but she's on the hook for America's loans.
$525 of her income tax goes to pay back the debt the government borrows to stay afloat. Plus interest. $298 goes to unemployment and labor programs. $238 to veterans benefi- benefits, like VA hospital and veteran job training programs, $179 goes to food and agriculture, and $167 of Tabitha's salary helps keep the government running, funding agencies like the FBI, Border Patrol, federal prisons, and even the salaries of her senators. Tabitha spends $127 on transportation agencies like the FAA and TSA, and $111 on education, including Pell Grants and the National Endowment for the Arts.
She gives $80,000 a year to the Department of Education. $83 a year to housing and community programs. $63 a year to energy and the environment.
$51 a year for international affairs like the State Department and Peace Corps. And $39 a year to fund America's science programs, which includes all federal scientific research and space exploration. Although it might seem like those dollars just vanish from your paycheck, the money you pay the federal government affects real people and changes our world every day.
It would be hard to find one of these expenses that doesn't touch your life or the life of someone you love. And guess what? These numbers aren't set in stone. You can contact your local representative, national lobby groups, and educate yourself.
The money our government collects in taxes doesn't belong to any one person or agency. It belongs to all of us, collectively. And we should all get a say in how it's spent.
And that's our two cents. We'd like to thank Audible for supporting PBS. Yes.
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Members own their books and can access them anytime. To learn more, visit audible.com forward slash two cents or text two cents to 500-500.