how does the government spend various taxes?



I’m taking specifically w/ income tax, property tax, sales tax, social security, excise tax and estate tax

how does the government spend various taxes?
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  1. A major debate now is taking place over whether the typical American family pays too much of its income in taxes. Some pundits and policymakers have decried tax levels they claim have been rising rapidly and have reached 38 percent of income for the typical family. This has lead some of them to conclude that radical reform of the federal tax system and steep reductions in the size of government may be required to lower tax burdens.

    Among those who have cited the 38 percent figure is Senate majority leader Trent Lott. In his response to the President’s State of the Union address, Senator Lott declared: “The typical family pays more than 38 percent of its income in taxes. That’s nearly 40 cents of every dollar. That’s not just bad policy. It’s immoral.”

    But it also is not accurate. The source of these claims is a November 1997 report of the Tax Foundation, which states that the combined federal, state, and local tax burden for a family at the median income level for all two-earner families was 38.2 percent in 1997, up from 37.3 percent of income in 1996. The Tax Foundation figure, however, is sharply at odds with information on tax burdens from more authoritative sources, including the Congressional Budget Office and the Joint Congressional Committee on Taxation.

    A measurement of tax burdens that relies on Congressional Budget Office and Joint Committee on Taxation data to estimate the median family’s federal tax burden would find the median-income family is paying between 26 percent and 30 percent of its income in federal, state and local taxes, not 38 percent. Moreover, this 26 percent to 30 percent figure does not take into account the effects of the 1997 federal tax law, which is lowering the effective federal tax rate of the typical family.
    Data from CBO and other sources also show that the tax burdens of median-income families have been relatively stable over the past two decades. These tax burdens are neither at all-time highs nor escalating rapidly.
    The Tax Foundation’s statement that taxes absorb 38.2 of a median two-earner family’s income includes an estimate that this median family pays 26.2 percent of income in federal taxes. Data from CBO and Joint Committee on Taxation data cast grave doubt on that estimate.

    The respected, non-partisan Congressional Budget Office has reported that the federal tax burden on families in the middle fifth of the income distribution equaled 19.7 percent of income before the effects of the 1997 Taxpayer Relief Act are taken into account, not 26.2 percent. Compared to the CBO findings, the Tax Foundation has overstated the federal tax burden of the typical, median-income family by nearly one-third. (See Table 1.)
    The Joint Committee on Taxation (JCT), the tax estimating arm of Congress, finds that families in the middle of the income distribution pay 15.9 percent of their incomes in federal taxes. Relative to the Joint Committee on Taxation analysis, the Tax Foundation overstates the federal tax burden of the typical, median-income family by more than 60 percent. (The JCT figure is lower than CBO’s for two reasons: the Joint Committee uses a broader definition of income than CBO, and it does not include the effects of corporate income taxes. Although the lack of inclusion of corporate taxes would have a major impact on the tax burden of high-income families, this is not the case for median-income families; median-income families do not bear much corporate income tax as they do not have much capital income.)
    The Tax Foundation also assumes that the state and local tax burden of the median-income two-earner family equals 12.1 percent of income. This figure is overstated as well. The source for it is a Commerce Department data series that is intended to be used to measure total economic activity, not tax burdens. The data series includes various items that clearly are not taxes, such as the contributions that state and local government employees make to their own pension plans. This data series also includes such non-tax items as rent that private entities pay for space a state or local government owns and fines that businesses pay for violating local codes or regulations, such as building codes. The Tax Foundation fails to distinguish between those items in the Commerce data series that are state and local taxes and those that are not, inappropriately counting these various non-tax items as taxes and including them in figuring the median family’s tax burden. If an adjustment is made to exclude the items that are not taxes, the average state and local tax burden, based on the Commerce Department data the Tax Foundation favors, would be 10.1 percent of income, not 12.1 percent.






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