Why Do We Pay Taxes?

By OMBA Staff
OnlineMBA | Originally published February 3, 2023

Flying into a rage over taxes is an American birthright. In 1773, angry colonists sparked revolution when they thumbed their noses at crazy British taxes and dumped three shiploads of tea into the Boston Harbor. Two-hundred and forty years and two world wars later, Americans are still demanding answers to tough tax questions. Who is bearing the brunt of the tax burden? Am I getting as much out of government spending as I’m paying in? And where are all these tax dollars going, anyway?

Online MBA‘s latest video tries to illuminate some of these mysteries. Running a superpower is expensive and the U.S. tax system, as imperfect and controversial as some of its finer points may be, is built to allocate the burden of payment as equitably as possible.

As it turns out, most people with average or below average incomes will actually receive a lot more in lifetime government benefits than they’ve put in. For instance, an individual that has earned $43,000 a year in taxable income for forty two years will have paid $345,000 in income taxes throughout their working life. But once they’ve retired, that same individual is eligible to receive a total of $417,000 in Social Security and Medicare benefits alone. So how does this balance out on the books? Well, theoretically (current budget shortfalls aside), those who make and save more over a lifetime will only be eligible for a benefit sum that’s either equal to or less than their total tax contributions. The idea is to allocate money to workers who need it most when they need it most…

…When it comes to taxes, it’s all about every single American contributing to the big pot of money. Fortunately, most Americans will receive their tax money back and then some upon retirement. For example, a man who earns $43,000 per year and works 42 years will have paid $345,000 cumulative over his lifetime in federal taxes and will receive an average of $417,000 back in social security and Medicare….[MORE]

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To read the entire unabridged article at OnlineMBA (and view the accompanying video) , visit: Why Do We Pay Taxes?