What Is The Federal Payroll Withholding Tax Spent On?

The federal payroll withholding tax is something that every American has to deal with that one time or another. This withholding tax is deducted directly from our paycheck, and lessens the amount of money we take on each pay period. Most Americans don't mind paying income tax; however, many Americans do not know where the money that is withheld is spent on.

Where Your Tax Dollars Go

After your withholding taxes been deducted from your paycheck, the employer then begins the process of passing it on to the government. This is usually done by your employer simply making a special tax deposit with the local bank. The bank then forwards the money to the Federal Reserve.

Once the money is received by the Federal Reserve, the Department of the Treasury then allocates funds to different government departments based on the budget that was passed by Congress for the fiscal year. The Department of the Treasury then writes checks to pay the government's bills.

Money withheld from your paycheck for payroll taxes is used to pay for national defense, infrastructure, Social Security, veteran’s benefits and countless other social services and programs. However, much of the money is actually used to pay for debts that were previously incurred by the US government. For example, interest on the national debt or Social Security and Medicare entitlements.

There is no quick explanation as to where your tax dollars are spent; however, suffice to say that the government uses the money withheld from your paycheck to pay for benefits and services that we, as Americans, have come to rely on.
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