Then transition to adulthood is sometimes hard to detect, but one thing you will note when you arrive at adulthood is paying taxes. Every American must meet their tax obligations. Every day is a tax day in America, and there is a lot of confusion associated with tax forms and requirements. Every American citizen is subject to local, state and federal taxation. However, there is a huge number of citizens who do not know anything about taxes. Here are important things every American citizen needs to be aware of as far as taxation is concerned.
Taxes are Expensive
There is no doubt taxes are costly, eating up to a quarter of the Gross Domestic Product every year. Only the most informed taxpayers will understand these details without issues. Based on data from Tax Foundation, the average American needs to work for about three months every year to meet their tax obligations. In other words, about 31 percent of all the money you make is directed towards paying taxes.
The different States have Different Taxes
A good number of American taxpayers until now don’t know that different states attract various tax deductions. Each state comprises of its local authorities with tax structure systems that are best in line with their needs. States such as California, New York, and Wisconsin attract a higher tax bracket. The Taxation levels for citizens living in New York are almost double those of citizens living in Wyoming. It helps to do simple research to determine if you’re paying more in your state as compared to others in a different state.
Government and Tax
Apparently, the government does not raise enough money from taxation. The American government has different organs from local and federal authorities all tasked with the responsibility of raising taxes, but the collection is never enough. The amount of money the federal government spends is more than what it collects. This is the reason the government owes other countries money, a good example being China, which it owes about $1.3 trillion.
How Government Spends Tax Collected
It goes without doubt that taxes affect the performance of an economy. Studies also show there are adverse effects of taxation on investment and economic growth. It is also costly to comply with taxation requirements. So are you wondering where does all the money go? Well, over half of the money collected from taxes caters for medical care and social security. About 20 percent goes to income security and other benefits while national security absorbs about 17 percent. The remaining percentage is divided into other sectors such as education, transport, energy among others.
The fact remains that all taxpayers are investors in their nation and tax dollars collected come back to the community. The government uses tax to fund health care programs, education, highway, and bridges, clean drinking water, national parks, national weather services among others. We do not all pay taxes equally and for obvious reasons we don’t all earn the same. Our tax codes are full of special tax codes and are tilted heavily in favor of the rich.