Why Are Taxes Collected?

It may take a massive calculator to figure out where all of your tax dollars go.

Taxes are collected at the local, state and federal level in order to fund a variety of public services. However, once the budgets of these three levels of government are combined, it can get a little confusing as to where every cent of every dollar is allocated.


At the federal level, the majority of your tax dollars are collected to fund national defense. This means paying for the operations that support any current wars, as well as troop salaries, research and development and maintenance.

Social Security

When it comes to where the largest percentage of your tax dollars go, Social Security runs a close second to defense. Specifically, your tax dollars are collected to fund the Social Security program, which pays retirement, survivor and disability benefits to those Americans who qualify.

Other Health Programs

The tax dollars collected by the government also go to fund other health-related programs such as Medicare, Medicaid and Children's Health Insurance Program (CHIP). Most of this money goes into Medicare, which pays for medical care of the elderly as well as the disabled. Medicaid and CHIP are also funded through state taxes.

Social Assistance

Tax dollars also pay for programs that assist others in need. For example, your taxes help pay for food stamps and supplemental security income (or SSI), which help low-income families, as well unemployment insurance for someone who has recently lost his job.

Other Expenditures

This category is gargantuan. There are numerous programs funded at the local, state and federal level; far too many to list and explain. Suffice it to say, your tax dollars are collected to pay for local schools and teachers' salaries, transportation and road maintenance, to pay interest on the national debt, scientific and medical research, and, of course, the salaries of your elected representatives.

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