White House Budget

Where are your tax dollars spent?

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate.com

Tax Day is done, for most of us anyway. Uncle Sam thanks you. He now has a fresh influx of cash to keep his businesses running.

But just what is he doing with our tax payments? The White House has an answer.

The Obama administration has an online calculator on WhiteHouse.gov, where you can enter in your income tax amount and see which federal operations get your money, and how much.

I plugged in $25,000 to get an idea of how taxes are distributed.

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Almost $6,873 of that payment is going toward health care. That’s 27.49 percent of the tax payment.

This isn’t the Affordable Care Act, otherwise known as Obamacare. According to the White House, the health care budget segment of the calculator covers spending on Medicare Supplementary Medical Insurance and the prescription drug benefit, as well as Medicaid, the Children’s Health Insurance Program, food safety, disease control and other health care activities.

Our payroll taxes for Medicare also are excluded from this spending segment. Your annual Medicare and Social Security taxes are added separately to the calculator’s receipt of your tax dollars.

And military and veterans health care programs are accounted for under national defense and veterans benefits, respectively.

Defense dollars

Speaking of national defense, it’s the second most expensive line item in the taxpayer calculator.

Almost 24 percent of our tax dollars go toward spending on military personnel, operations, procurement and other national defense activities. For the $25,000 tax bill in our example, that’s around $5,978.

The only other sector that takes up a double-digit percentage of our taxes is job and family security. A little more than 18 percent of our taxes falls into this category, which includes unemployment insurance, food assistance and certain tax credits, such as the Earned Income Tax Credit, and other programs designed for income security. Of the $25,000 in taxes, $4,542.50 goes to this category.

Interest, etc.

What about the federal debt’s interest? That was a huge political rallying cry a few election cycles ago.

The White House calculator says 9.07 percent of our dollars go toward the accruing interest on the national debt. For this example’s purposes, that comes to almost $2,268.

The remaining areas where our taxes are spent, and the tax dollar percentages that go toward them, are: veterans benefits at 5.93 percent; education and job training at 3.59 percent; immigration, law enforcement and administration of justice at 2 percent; international affairs at 1.85 percent; natural resources, energy and environment at 1.64 percent; science, space and technology programs at 1.13 percent; agriculture at 0.97 percent; community, area and regional development at 0.43 percent; federal response to natural disasters at 0.39 percent; and the always fun catchall of additional government programs at 3.42 percent.

Uncle Sam’s balance sheet

Are you surprised by just where your tax dollars are being spent? More importantly, are you happy or upset about the distribution of the dollars?

Personally, I’d like to take some of the national defense dollars and send them to scientific endeavors, especially space programs. I mean, really, how stupid is it that we have to hitch rocket rides to the International Space Station from Russia?

If you’re not pleased with your taxpayer receipt, take it up with your members of Congress.

To see where your dollars could go in 2015, see Bankrate’s interactive story “What if you spent like the government?” It’s based on the White House’s 2015 budget proposal.

And if you got an extension to file your 2014 taxes, be sure to check the taxpayer receipt calculator when you’re done and see where your tax dollars will go.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Details of the President’s State of the Union Tax Proposals

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

President Barack Obama used Tuesday’s State of the Union address to announce that he will propose tax increases for higher-income individuals and provide tax relief for middle-class taxpayers. Ahead of the speech, the White House provided details of what the president plans to propose, which it characterized as simplifying the Internal Revenue Code, eliminating loopholes, and helping “middle class families get ahead and grow the economy.”

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Specific proposals on the president’s wish list include:

  • Eliminate the step-up in basis for assets that are transferred at death, treating transfers at death as realization events for capital gains tax purposes;
  • Raise the top tax rate on capital gains and dividends to 28%, which would be imposed on taxpayers with incomes over about $500,000;
  • Impose a 7-basis-point fee on the liabilities of large financial institutions to discourage “excessive borrowing”;
  • Create a $500 second-earner tax credit for families in which both spouses work (5% of the first $10,000 of the lower-earning spouse’s income; credit would phase out for couples with incomes between $120,000 and $210,000);
  • Modify various child care tax incentives, including increasing the earned income tax credit (EITC) for childless taxpayers, increasing the EITC phaseout level, making permanent EITC increases that are scheduled to expire after 2017, tripling the maximum child and dependent care credit and making the income cutoff $120,000, and eliminating child care flexible spending accounts;
  • Consolidate and expand education tax benefits, including making the American opportunity tax credit permanent and folding the lifetime learning credit into it, increase the refundable portion to $1,500, and make it available to more students; and
  • Reform retirement tax incentives, including automatically enrolling workers in IRAs, requiring employers to allow more part-time workers to participate in their retirement plans, and providing a cap of about $3.4 million in an IRA.

The White House did not provide a timeline for when legislation embodying these proposals would be introduced. Since both houses of Congress are now controlled by Republicans, any proposal by the president will face a steep uphill climb.

Article: The Tax Advisor

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

What The Tax Deal Means For You

This article by Susie Poppick originally appeared in Money Magazine and quoted Paul Herman as a Subject Matter Expert on tax preparation. The original article can be found online here.

white-plains-cpa-firm-westchester-accounting-firm-paperwork-for-tax-filingAfter much nail biting, the fiscal cliff deal has finally brought certainty to the federal tax landscape, and for most the news is good.

Even the tax increases that slipped through — a jump in the top rate from 35% to 39.6% and a hike in the capital gains tax from 15% to 20% — kick in only on incomes over $400,000 for singles, $450,000 for married couples filing jointly, not the $200,000 and $250,000 cutoffs President Obama had called for.

“The tax bill is a net positive for average Americans,” says White Plains, NY CPA Paul Herman.

Related: fiscal cliff deal raises taxes on 77% of Americans

Look past the headlines, though, and you’ll find a mixed bag: new rules that could help you in the years ahead, depending upon who you are, but higher taxes for a bigger group than you might expect.

Here are the most important changes you need to know about, and your best moves now.

A BIGGER BILL FOR TOP EARNERS

A lower threshold for tax pain. Just because you’re bringing in less than $400,000 a year, you’re not out of the woods.

By limiting two important ways to cut your taxable income, read more …

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.