When Americans file their taxes, it’s natural to wonder, “Where do my tax dollars go? What do they fund? And what don’t they fund?”

According to the latest Congressional Budget Office report on the distribution of federal taxes, Washington collects about $20,000 from the average household. Yet the 2016 deficit was a whopping $587 billion.

The almost $3.3 trillion that the federal government taxes out of the economy each year isn’t enough to satiate its profligate spending.

So where do our tax dollars go?

Some believe most of it goes to welfare and foreign aid. Others believe defense and corporate welfare dominate the budget.

In reality, health entitlements—Medicare, Medicaid, Obamacare—and Social Security are the largest programs. These entitlements and interest on the debt are set to consume every dollar of taxes paid in just over 20 years.

Social Security. The single largest federal program, Social Security accounts for roughly a quarter of all federal spending. Its trust funds are already paying out more than they take in, and as more people retire, the system will be under continued stress.

Without reform, the program’s trustees project benefits will need to be cut as much as 21 percent if nothing is done by 2034 (the Congressional Budget Office projects insolvency will come four years sooner).

Major health entitlements. Federal health programs such as Medicare and Medicaid and Obamacare subsidies are also growing at an unsustainable trajectory. Currently consuming 28 percent of the budget, health spending continues to grow faster than the economy.

Income security. Other income security programs—veterans’ benefits, unemployment compensation, food and housing assistance, federal employee retirement, and disability—are 18 percent of the budget, surpassing national defense spending.

Defense. The defense budget covers everything from military paychecks, to operations overseas, to the research, development, and acquisition of new technologies and equipment.

At 16 percent of the federal budget, defense spending is the last major category of federal spending and has been falling as a percent of the budget for the last decade.

And the rest?

Interest. Over the coming decade, U.S. debt held by the public is projected to balloon to 89 percent of gross domestic product—driven primarily by health and Social Security spending.

Deficit spending does not come cheap. As the debt increases, so does the cost of the interest we must pay to those who hold the debt, the unfortunate result of excessive government spending.

Currently, 6 percent of the budget is spent on interest—money that takes away from other priorities. Over the next 10 years, net interest on the debt is projected to rise to almost 12 percent of the budget, more than is projected to be spent on national defense.

Without reforming America’s massive and growing federal programs, Washington will have to continue to borrow increasing amounts of money, piling debt onto younger generations and putting the nation on an unsustainable economic course.

Growing government spending threatens higher taxes on current and future taxpayers. Increasing taxes is not an option. Washington already takes too much of the money that Americans work hard to earn.

Congress must rethink how it is spending the people’s money. The Heritage Foundation’s recently released “Blueprint for Balance” provides a workable guide for spending reform, listing $10 trillion of spending cuts that balance the budget in seven years.

The tax code is also badly in need of an update to make it less of a burden on the American people, American businesses, and the economy. Pro-growth tax reforms can unleash private investment, encourage job creation, and fuel economic growth, increasing prosperity for all Americans.

The first step to putting the federal budget back on a sustainable path is fully accounting for how precious taxpayer dollars are being used. Are you getting your money’s worth? (For more from the author of “Where Do Your Tax Dollars Go?” please click HERE)

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With federal Tax Day now here, taxes have been on many people’s minds and have featured in a few recent public opinion studies.

A study released by Gallup this week found that Americans are more likely to say the income taxes they pay are fair, after a long downward trend since 2003.

Pew Research Center also released a study on taxes this week, but with a broader focus. It concluded that Americans are more likely now than they were 20 years ago to say they think the tax system as a whole is unfair, and that the main reason for the unfairness is that corporations and the wealthy are getting away with paying too little.

Yet in this Pew study as well, when asked about their own tax rates, respondents expressed a similar level of contentment as recorded in the Gallup study. Fifty-four percent told Pew they pay “about the right amount,” while 61 percent told Gallup the amount they pay is fair.

Taking these two studies together, Americans are more content with their own tax rates, yet tend to think the federal tax system as a whole is unfair.

Pew found that the top two irritants for Americans were that “some corporations don’t pay their fair share” (with 62 percent being bothered “a lot” by this), and that “some wealthy people don’t pay their fair share” (60 percent).

Less were bothered by the complexity of the tax system (43 percent). A similar proportion said they were not too much or not at all bothered by the amount they themselves pay (46 percent).

These are interesting insights, but in trying to relate them back to public policy, several issues crop up.

First off, “fair” is a very subjective term, and it raises a lot of questions: What would a more fair treatment of wealthy Americans and corporations look like in Americans’ minds? Higher rates? Fewer “loopholes”? (When we claim them ourselves, we call them “deductions.”) More auditing and enforcement?

And what is shaping Americans’ impressions of what is fair? Political rhetoric? Accusations of greed? An objective and informed understanding of who pays what in the U.S. tax system?

Research from The Heritage Foundation’s Center on Public Opinion suggests that it is definitely not the latter. Americans’ inaccurate understanding of who pays what taxes in this country likely drives their sense of unfairness.

When federal and state taxes are added together, the average corporate tax rate in the U.S. is 39 percent. That’s the highest corporate tax rate in the world.

A recent study conducted March 17-27 among registered voters on corporate taxes found that on average, Americans guess that the corporate rate is 30 percent—nine points lower than reality. The most common answer was 35 percent (16 percent of respondents said this).

But most Americans guessed something lower: 30 percent, 25 percent, even 20, 15, or 10 percent.

Another study conducted in December 2014 found a similar gap between reality and perception in personal income taxes.

That year, the top 10 percent of American earners making $120,000 per year or more earned 41 percent of all income, but paid 68 percent of all income taxes.

Americans were fairly accurate when it came to who earns what: They guessed on average that the top 10 percent of Americans earned 41 percent of American money, when in fact they made 45 percent of American money.

But they were pretty far off when it came to guessing the proportion of the nation’s taxes they pay. They guessed the top 10 percent pays 38 percent of all taxes, and they were off by 30 points. The top 10 percent pays 68 percent of all U.S. taxes.

The results indicate that when it comes to actually working out the numbers in their heads, Americans don’t think the tax scale is as graduated as it is. In fact, they think it’s graduated in the wrong way, with the middle class paying a higher proportion of taxes than they earn and the top 10 percent getting off easy.

Not surprisingly, Americans’ attitudes toward tax policy proposals, like raising or lowering tax rates, change when they have accurate information.

When asked after hearing the true proportions of income earned and taxes paid, the proportion of Americans saying they think the top 10 percent of earners doesn’t pay enough in taxes decreased by 31 percent.

The proportion saying they pay about the right amount increased 20 percent, and more even said that they pay too much (+11 percent).

Similarly, 50 percent of Americans think the corporate tax rate is too high, based on an average federal and state corporate tax rate of 39 percent.

And when Americans are shown comparison rates from a range of 12 different developed countries around the world, demonstrating that the U.S. corporate rate is the highest in the developed world, 67 percent think the U.S. rate is too high, further illustrating the subjectivity and fluidity of “fairness” within the tax system.

Gallup and Pew’s studies leave little doubt that Americans are concerned about the fairness of the current U.S. tax system.

When those feelings are based on false assumptions and incorrect information, the proper response is not to shape public policy around the whim of the people, but to provide accurate information about the United States’ current system, so that the American people can make an informed decision moving forward. (For more from the author of “New Data Show That Ignorance of US Tax Policy Fuels Leftward Sentiments” please click HERE)

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