There are certain expenses the government has no choice in paying each year. This mandatory spending means that certain programs and services the federal government supports cannot survive without annual tax revenue. This type of spending accounts for approximately two-thirds of all revenue the government collects through taxes. Some of the largest recipients of these funds are health-care programs, the military, creditors of the government, food stamp programs, veterans organizations and transportation. Since it is mandatory for the government to make these payments, Congress has no power to eliminate certain expenses from the annual budget. It can, however, tighten the eligibility requirements for each program, which effectively reduces the amount of tax revenue that will fund it.
The other one-third of the tax revenue the government collects can be spent according to the country's current needs, determined by Congress and the president. It may come as no surprise, but a large portion of the discretionary budget goes to the U.S. military. The remaining funds are spread across various programs and can even provide additional revenue to some of the mandatory spending programs. In 2012, discretionary funds are budgeted for food programs, education, international affairs and for the environment, energy and scientific development.
State Tax Collection
Each state in the nation has the authority to impose its own taxes to support state government programs. Although states receive funds directly from the federal government, these funds alone are insufficient for the states to operate, which is why they must collect taxes. The state of Colorado, for example, needs to collect taxes to house approximately 25,000 inmates in prison, manage three million acres of public land, maintain and build over 23,000 miles of state highways and support local police forces and courts.
In addition to federal and state income taxes, all taxpayers pay additional amounts to fund the national Social Security and Medicare programs. The revenue for these programs is included in the federal government's mandatory budget; however, most of the funds come directly from the specific Social Security and Medicare taxes you pay. Both of these programs are expensive to maintain, but without them most taxpayers would be unable to support themselves during their retirement years or during periods of disability. Unlike the income tax, the government only imposes these taxes on your earnings from work and providing services. Americans don't fund these programs from the interest and investment income they receive.