Governments around the world commonly raise money by imposing taxes on consumer spending, investment and business activity. As in many other countries, tax revenue in the United States generally funds government operations. This includes all the facilities, salaries and logistics involved in running the country. During Fiscal Year 2017, the Internal Revenue Service collected more than $3.4 trillion in taxes. To ensure the flow of tax revenue, agencies such as the IRS ensure that taxes are collected efficiently.
Taxes are imposed to provide government services, develop infrastructure and support the military and law enforcement.
One of the largest government expenses is providing services to people. For instance, local governments are generally responsible for emergency services including emergency medical responders and fire and police departments. These services are commonly paid for by property tax revenues generated annually from home and property owners. Similarly, state governments impose sales, licensing or income taxes to fund state services that include road maintenance and expansion, social assistance benefits and education. Federal services such as Social Security benefits are funded from federal income taxes. Federal spending on Social Security was $945 billion in Fiscal Year 2017.
Tax revenue allows government agencies to play a key role in developing infrastructure. At the national level, the federal government funds programs targeted at modernizing and improving areas of national significance. This includes a fund to strengthen and maintain the integrity of the nation's highways. In 2017, this fund was estimated to have about $40.9 billion which comes from gas taxes, among other sources. The current administration would also like to see infrastructure funding to make it easier for states to privatize rest areas and build tollways.
Taxes also generate revenue to fund public goods from which every citizen benefits. In economic terms, public goods are consumed by everyone, and the production of public goods has no competition. For instance, military and law enforcement officers are public goods. According to the White House Office of Management and Budget, the Department of Defense budget includes spending to support military personnel. For Fiscal Year 2018, the department requested an additional $30 billion to address shortfalls in preparedness for war, as well as to accelerate our battle with Syria. The department also requested $185.7 billion in military pay and benefits. In Fiscal Year 2017, the Department of Justice asked for a budget of $29 billion, which includes $27 billion for federal programs and $2 billion to assist state and local departments. Since federal, state and local police departments often work together to reduce crime and manage drug activities, investing in local governments benefits the nation as a whole. The federal budget usually reflects this.
- IRS: SOI Tax Stats - IRS Data Book
- Tax Policy Center: Key Elements of the U.S. Tax System
- Reuters: Trump Urges Congress to Help Stimulate $1.5 Trillion in Infrastructure Spending
- DoD: Office of the Undersecretary of Defense
- Committee for a Responsible Federal Budget: Treasury – 2018 Deficit Was $779 Billion
- The United States Department of Justice: Department of Justice FY 2017 Budget Request