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Global Issues Paper: Your Tax Dollars
Anthony Connor
MGMT 3111 HR Management
Spring 2010 Dr. Whithem
April 4, 2010
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Your Tax Dollars
Abstract
This paper will summarize and explain some of the ways the United States (US) government
allocates the funds it receives from its citizens and organizations through the means of taxation.
It will explain exactly where the money comes from and also the divisions of the government
that receive the money and exactly what percentages they each get. Also, some recent events
concerning taxation will be presented such as the integration of Universal Healthcare in the US,
New Jersey (NJ) legalizing the use of medicinal marijuana, the Unemployment Bill, and also it
will touch on President Barack Obama’s budget for the 2011 fiscal year.
Your Tax Dollars
The United States uses taxes and tariffs to acquire money for the government and to fund
its operations. Each state is responsible for setting tax rates and collecting taxes accordingly.
There are many different ways that the government acquires taxes. First and foremost are
individual income taxes from the citizens of the US. The first United States income tax was
imposed in July 1861, at 3% of all incomes over 800 dollars in order to help pay for the war
effort in the American Civil War. (Wikipedia, Income Tax, 2010) Taxes are still used to fuel war
efforts but now are allocated in many other places in the government. The government also
acquires taxes from Social Security and other payroll taxes. The application of Social Security
first came about from the application of “Poor Laws” that the English used to provide help to the
poor through acquisition of local taxes. The modern version of Social Security did not come
about until 1935. Social Security is a fund that guarantees people money to live off of after they
are retired (Administration, 2010) Also, the other payroll taxes include unemployment,
disability, and healthcare.
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Your Tax Dollars
Since the election of President Barack Obama in January 2009, health care has seen a
new face in the US. The US was the only industrialized country in the world with no universal
health care system in place. That was true until March 23, 2010 when the Patient Protection and
Affordable Care Act were passed. Three days after it was signed into law, it was amended by the
Health Care and Education Reconciliation Act which was signed into law on March 30, 2010.
(Wikipedia, Universal Health Care, 2010) The cost of the bill is $940 billion over the next 10
years. It will extend coverage to 32 million Americans who are currently uninsured. People who
are uninsured and those who are self employed will be able to obtain insurance through state
based exchanges and it will be available to citizens between the 133 and 400 percent poverty
level. Those who are applying between the 133 and 400 percent federal poverty level can not
apply for or already be covered by Medicare, Medicaid, or an employer. The plan is being paid
for through Medicare tax increases of 3.8% for families making more than $250,000 (individuals
$200,000). (Jackson & Nolen, 2010) In addition to the universal health care bill, there was also a
movement to pass legislation for extending unemployment benefits. There was much nay-say on
the action because the bill would increase the deficit an additional $10 billion. (Riha, 2010) The
notion to extend benefits for unemployment will only last for a month while Congress has more
time to come up with a solution for the year of 2010.
Just how taxes are acquired from individuals they are also collected from corporations.
Corporate tax refers to a direct tax levied by various jurisdictions on the profits made by
companies or associations and often includes capital gains of a company. (Wikipedia, Income
Tax, 2010) Cap and trade within companies and organizations becomes a good way to gain
capitol. By selling emission rights to other companies they can create revenue as well as keep
government mandates to create less pollution. There are also excises taxes that count for any tax
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Your Tax Dollars
that is not a property tax or capitation. Most are familiar with this tax as a “sin tax” on goods
such as alcohol, cigarettes, and sweets. Pennsylvania has incorporated a “Soda Tax” that poses a
tax on soft drinks and any drink with sugar added. The tax is 2 cents per ounce (Mucha, 2010).
Finally there is the acquisition of taxes through customs and tariffs. This is simply the tax
applied to goods coming into and out of the country. Different rates are applied to goods
depending on what it is being transported through our borders.
Use of Taxes
For the 2010 fiscal year, it is estimated that receipts will total approximately $2.6 trillion.
From that amount, $1.1 trillion will be from individual income taxes, $293 billion from corporate
taxes, $934 billion from Social Security and Retirement, $80 billion from excise taxes, $24
billion from estate and gift taxes, $29 billion are from customs duties, and $96 billion are from
deposits of earnings and other receipts. (whitehouse.gov, 2010) Government spending is broken
down between mandatory and discretionary spending. The spending in mandatory spending
factors into Social Security, Medicare, Medicaid, potential disaster costs, interest on national
debt, and other mandatory programs. Also for the last year, two other mandatory spending
categories were added for the financial crisis: Troubled Asset Relief Program (TARP) and
Financial Stabilization Efforts). Neither of which are active currently in 2011. As far as
discretionary spending the tax collected goes to the departments of health and human services,
transportation, veterans affairs, defense, state, housing and urban development, education,
homeland security, energy, agriculture, justice, commerce, labor, treasury, interior, the National
Aeronautics and Space Administration (NASA), Environmental Protection Agency (EPA),
National Science Foundation (NSF), Corps of Engineers, National Infrastructure Bank, Small
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Your Tax Dollars
Business Administration, General Services Administration, and finally the Corporation for
National and Community Service. (whitehouse.gov, 2010)(See Figure 1)
Better Use of Taxes
New Jersey has just recently legalized the use of medicinal marijuana for patients with
severe chronic illnesses. NJ is the 14th in the country to legalize the use of medicinal marijuana.
It is mainly used for people with severe illnesses such as cancer, AIDS, Lou Gehrig’s
disease, muscular dystrophy and multiple sclerosis. They have access to marijuana grown and
distributed through state-monitored dispensaries. The action was approved in January of 2010
and has been under constant review since. (Kocieniewski, 2010) Citizens are claiming that if
marijuana was legalized in general in NJ that the money generated through taxation of the drug
would more than bring NJ out of debt. The topic remains controversial.
A big issue in NJ is the problem of education and the lack of funding. March 16, 2010,
Governor Chris Christie of New Jersey announced a budget for the upcoming fiscal year that
reduced public education by $820 million and aid for colleges and universities by $175 million.
The plan is to get the state of NJ out of its $29.3 billion deficit. (Brean, 2010) It has become
apparent that there is not enough federal aid for education. Fewer grants are being issued to
students and there is a lot of pressure being put on to students to take out loans to continue
paying for their educations. The Pell Grant is one of the largest sources of federal aid for lowincome students and over time the grant has not been keeping up with the ever rising cost of
tuition. With the current financial situation in the US, it is also becoming increasingly harder to
obtain loans from the government for education. (See Figure 2)
Despite the deficit, I feel there is a place where money can be salvaged from and
distributed to other organizations. The spending on the prison systems in the US surpasses that of
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Your Tax Dollars
education in most states. Recent studies have shown that about 1 in 31 adults (7.3 million)
Americans are incarcerated. In 2008 the prison system had a cost of about $47 billion. A survey
of 34 states found that states spent an average of $29,000 a year on prisoners, compared with
$1,250 on probationers and $2,750 on parolees. (Moore, 2009) On average it costs about $26,
273 to send a student to a private four year college in 2010. (Board, 2010) There are ways to
acquire funds without having to raise taxes and the simple solution would be to allocate the
money better.
Conclusion
The United States is still in a state of turmoil as far as trying to recoup the loses from the
down turn of the economy in the last couple years. With that being said, it is very important that
taxes are allocated very carefully amongst the organizations of the federal government in order to
regain balance in the economy. I have faith in President Barack Obama’s budget for the 2011
fiscal year. So far Obama’s plan for universal healthcare has increase his approval ratings since
this was a promise he made during the campaign for presidency and he passed it into law in less
than two years. The notion to extend unemployment benefits was a great move for the people
even though at the current point in time it put the country in slightly more debt. After all things
considered, it is essential that every citizen be accounted for so that the government knows where
to put money and where to take it from and the only way to accomplish that is by accurately
completing the United States 2010 Census. Help the government put your tax dollars towards the
right cause.
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Your Tax Dollars
Works Cited
Administration, S. S. (2010, February 1). Historical Background and Development of Social
Security. Retrieved March 2010, from Social Security Online:
http://www.ssa.gov/history/briefhistory3.html
Board, T. C. (2010). 2009 - 10 College Prices. Retrieved March 2010, from CollegeBoard.com:
http://www.collegeboard.com/student/pay/add-it-up/4494.html
Brean, M. (2010, March 22). Christie announces sweeping education budget cuts in N.J.
Retrieved March 2010, from the Daily Princetonian:
http://www.dailyprincetonian.com/2010/03/22/25559/
Jackson, J., & Nolen, J. (2010, March 3). Health Care Reform Bill Summary: A Look At What's
in the Bill. Retrieved March 2010, from CBS News: Politics:
http://www.cbsnews.com/8301-503544_162-20000846-503544.html
Kocieniewski, D. (2010, January 11). New Jersey Vote Backs Marijuana for Severely Ill.
Retrieved March 2010, from New York Times:
http://www.nytimes.com/2010/01/12/nyregion/12marijuana.html
Moore, S. (2009, March 2). Prison Spending Outpaces All but Medicaid. Retrieved March 2010,
from New York Times: http://www.nytimes.com/2009/03/03/us/03prison.html
Mucha, P. (2010, March 5). Soda tax makes gas tax look whimpy. Retrieved March 2010, from
philly.com: http://www.philly.com/philly/news/breaking/86589897.html
Riha, A. M. (2010, March 3). President Signs Bill Extending Unemployment Benefits. Retrieved
March 2010, from Row 2 Seat 4:
http://whitehouse.blogs.foxnews.com/2010/03/03/president-signs-bill-extendingunemployment-benefits/
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Your Tax Dollars
Whitehouse.gov. (2010). Presidents Budget. Retrieved March 2010, from Office of Management
and Budget: http://www.whitehouse.gov/omb/budget/Overview/
Wikipedia. (2010, March 29). Income Tax. Retrieved March 2010, from Wikipedia.org:
http://en.wikipedia.org/wiki/Income_tax
Wikipedia. (2010, April 4). Universal Health Care. Retrieved March 2010, from wikipedia.org:
http://en.wikipedia.org/wiki/Universal_health_care#United_States
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Your Tax Dollars
Figure 1
Figure 2