Taxes

Your Tax Dollars at Work

The average income in 2011 was $41,560. With this salary and a single filing status, you could expect to pay around $5,153 (12.4 percent of your earnings) in federal taxes, in addition to $2,577 (6.2 percent) toward Social Security and $603 (1.5 percent) toward Medicare. Where do your taxes go? The largest portion goes toward national defense, which eats up 17 percent of the federal budget. Medicare, income security and Social Security are close behind, each taking up 16 percent. Another 10 percent pays for the interest on the country’s debts. Other costs that take up less than 10 percent of taxes include health costs, veteran benefits, education and transportation.

Taxes Through History

President Abraham Lincoln enacted the first income tax in the United States, and the 1862 law helped pay for Civil War expenses. Individuals with annual incomes of $600 to $10,000 paid 3 percent, while individuals with higher incomes paid 5 percent. The tax was repealed just 10 years later and was not reinstated until 1894. In the 120 years since then, income tax has undergone numerous changes to keep up with the changing financial needs of the country. Today, the average American pays close to 12 percent of his or her income in federal income tax.