Home > Personal Income Tax > What is My Tax Spent On?

What is My Tax Spent On?

By: J.A.J Aaronson - Updated: 4 Mar 2015 | comments*Discuss
 
Tax Spent Spending Government

Income tax is a bone of perpetual contention among the British public. Many feel that we are being taxed too much; others suggest that the rich are paying proportionately too little. Furthermore, it is frequently difficult to truly understand where your money is going.

In the case of Council Tax it is fairly visible; your payments (theoretically) contribute to road repairs, refuse collections and so on. However, Income Tax, VAT and other duties are sometimes difficult to account for.

Government Spending

Governments derive their income from one of three sources: the issuing of currency, the collection of taxes, and borrowing. However, they can only borrow to the extent that they do as a result of the apparent security offered by guaranteed tax income. According to economists, government spending can be split into three distinct areas. These are:

  • Government Consumption: This covers the purchasing of items or services that are to be used immediately. This includes spending on areas such as education and defence.
  • Government Investment: Accounts for purchases that will supposedly create a benefit in the future. This is a broader category as it can include both physical purchases and less tangible investment; the building of a factory would be classed as government investment, as would the cost of putting a child through school.
  • Transfer Payments: This covers spending that is not a purchase; for example, Jobseekers Allowance payments or the State Pension.

Fiscal Stimulus

Today, much of our income tax is being spent on 'stimulus' projects to counter the contraction of the economy. This is a technique first advocated by the economist John Maynard Keynes, who suggested that consumption and demand could be increased by extending government spending. As such, a hefty proportion of your tax payments are currently being used to perform tasks that will create jobs, for example the construction of new infrastructure elements.

A pertinent example of this is a current motorway widening project, which the government is funding because private companies are unable to do so themselves. Perhaps more controversially, a significant proportion of tax revenue is also being used to prop up high street banks, with some of your payments acting as insurance against so-called 'toxic' assets held by these institutions.

Regardless of the economic circumstances, your tax is also spent on basic social and welfare projects, like benefit payments and the NHS. The police force is funded through income tax payments, although local fire services rely on Council Tax income to a great degree. Similarly, school equipment, student loans, and government agencies like the Office of Fair Trading are all paid for with your tax.

Many people resent the amount they lose from their wage packet in tax payments, and this amount is likely to increase over the coming years as we pay for the current economic problems. However, it is illogical to think of it as a loss. Instead, it should be considered an exchange – in exchange for your tax payments, you receive access to the benefits of a functioning state.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Hmmmm yes dear very interesting, thanks millions
Chloe - 4-Mar-15 @ 2:29 PM
" However, it is illogical to think of it as a loss. Instead, it should be considered an exchange – in exchange for your tax payments, you receive access to the benefits of a functioning state." So, you would agree that if a state is failing to demonstrate sound functionality and lawfulness, it would be pertinent to revoke one's implied consent to be be governed and withhold taxes?
csinvestments - 9-Sep-13 @ 12:15 AM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Sbuj
    Re: How Will My Second Job Be Taxed?
    Hi I have full time job plus extra part time if I will start working for agency tax for one of my extra jobs will b change…
    16 October 2018
  • Lizzie
    Re: Children's Bonus Bond
    I was bought a £25 Children's Bonus Bond as a christening present in 2001 and was wondering how much it is worth now and when it matures.
    8 October 2018
  • Storm
    Re: What Does Road Tax Pay For?
    I see a fair bit of pothole repairs, the biggest problem I see is the work carried out is very poor indeed more often than not as…
    26 September 2018
  • PETA
    Re: Payment of Pensions
    Can I change my pension to weekly how does this work
    20 September 2018
  • Kaz
    Re: How Will My Second Job Be Taxed?
    Up until june this year i only had 1 job of 14 hrs a wk at minimum.wage, i now have 3 jobs, the 2nd one being 6.7 hrs a wk @…
    19 September 2018
  • Dom
    Re: Claiming Tax Relief on Mileage
    I am paid a £250 per month travel allowance with my salary, and claim monthly travel expenses each month from the company for…
    13 September 2018
  • Fifi
    Re: How Will My Second Job Be Taxed?
    Hi I’m working 22hrs a week at 7.85ph but also signed up to an agency to work as and when, how much tax would I pay
    11 September 2018
  • Littledigidi
    Re: Claiming Tax Relief on Mileage
    Hi - I have a fuel card, the majority of my mileage is work related. can i claim any tax back on this. My company pay for all my…
    10 September 2018
  • TheTaxGuide
    Re: How Will My Second Job Be Taxed?
    B - Your Question:I have two jobs the first is as and when and the second is 12 hrs a week, combined I am nowhere near the…
    4 September 2018
  • Loui
    Re: How Will My Second Job Be Taxed?
    I am employed working 15hrs at £8.20 but get paid monthly and I'm self employed for 2 hrs a week at £8.00 a week. Would I get…
    3 September 2018