Where Does All The Money Go?

How Much Did You Say?

  • You pay $12,128 in income taxes between the federal and state governments, assuming you file jointly, take the standard deduction and have one dependent (the average household in San José has 3.14 residents).
  • You pay $7,493 in payroll taxes for Social Security and Medicare (your employer pays an equal amount on your behalf).
  • As a homeowner, you pay property taxes. This amount is highly variable depending on when you purchased your home, but let’s assume the taxable value on your home is $500k, or approximately half of the average home value in San José today. This implies that you purchased your home over a decade ago. With the standard 1% tax rate on your taxable value, you would pay $5,000 per year in property taxes. (Note for renters: property taxes are indirectly captured in your monthly rent).
  • In addition to the base property tax, you also pay “special assessments” on your property tax bill that apply to the sewer system, garbage collection, library parcel tax, flood control, mosquito abatement and a variety of other local taxes passed by voters. For the median San José homeowner, these taxes and fees cost on the order of $1,200 per year, though your bill will vary depending on the districts in which you live.
  • You pay sales tax on all qualifying purchases. We couldn’t locate a figure for median household sales tax in San José, but the Governor’s 2019–2020 budget message states that the average California household spends about 27% of income on items that are eligible for sales tax. Combining this figure with our median household income of $104,000 and San José’s 9.25% sales tax, we get an estimated total sales tax of $2,597 per year.
  • You pay fees and taxes associated with car ownership, including a gas tax of $0.50 per gallon. The Legislative Analysts’ Office estimates that each driver pays about $750 per year in taxes and fees. Since the median household owns two vehicles, we will double it to $1500 per year.

Where The Money Goes

  1. Social Insurance: The largest category of expense involves social insurance programs like Social Security, Medicare and Medicaid that ensure that Americans have a basic income and access to health care into old age. These safety net programs also provide health, nutrition and other services to disabled and low-income Americans, including millions of vulnerable children. These programs reflect our solidarity as a nation. They also represent a growing financial obligation as our population ages.
  2. Protection: The second largest category of expense focuses on protection from physical harm, including national defense, police, fire, corrections and inspections. While national defense spending has decreased as a percentage of economic output over the last fifty years (see chart below), spending on policing and corrections has increased over that time span and has come under greater scrutiny.
  3. Future Investments: Third, we invest in our future in a number of ways, but especially by educating younger generations and building and maintaining public infrastructure. Spending on both public education and infrastructure as a percentage of economic output has been relatively flat over the last fifty years. If anything, spending in this third category has been constrained by growing obligations in the social insurance category, representing a tension between spending that provides critical support to today’s adult generations and investments from which our children and future generations would benefit.
Federal spending categories as a share of GDP over time. Source: Pew Research Center

San José Spending

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Matt Mahan

Matt Mahan

1.1K Followers

Councilmember, San Jose District 10. Formerly Brigade CEO & Co-founder Brigade, SVLG and Joint Venture Silicon Valley Boards, and SJ Clean Energy Commission