Ever Wondered Where All Your Business Taxes Go?

Written By Alla Levin
February 07, 2020
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Ever Wondered Where All Your Business Taxes Go?

Most people assume that when they pay their taxes to the government, the state uses that money to provide services itself. But when you actually follow the cash, you discover that it is a very different story.

Anyone who studied economics at school knows about something called the “circular flow” of income.

Money goes from households to business to the state and then back again in a kind of loop-de-loop, keeping the entire economic system lubricated.

It has been a feature of the economy ever since the state began its tax and spending policies at the founding of the Republic itself.

In recent years, however, the amount of money that the government spends has gone up tremendously.

As the private sector continues to generate new wealth, it can support and bigger and bigger state.

That government can then order more spending across state-controlled sectors of the economy, like education, defense, and parts of the transportation network.

Interestingly, though, the money from your taxes doesn’t stay in-house. A lot of it goes to other private sector firms, as the following infographic shows. In other words, your taxes could wind up in your competitor’s pockets. Not good.

The infographic also reveals the extent of government involvement in the economy today.

Not only does it provide traditional public goods, like justice and defense, but it is also involved in other areas, such as energy and healthcare – places which many people believe should be in the hands of the private sector.

Check out the following infographic to see where your taxes go.

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