How Taxes and Government Budgets Work

The basics

• Taxes are payments people and businesses make to the government. The money pays for programs, services, public workers, roads and buildings, and interest on what the government has borrowed.
• The federal government gets more than half of its money from individual income taxes. Social Security and Medicare taxes, taken out of paychecks, are its next biggest source.
• States mostly rely on income taxes and sales taxes, but the mix varies a lot. Nine states have no tax on personal income and lean on other taxes instead.
• Nationwide, local governments get most of their tax money from property taxes, paid on homes, land and buildings. This money often pays for schools, police, fire, roads and other local services.
• Cities, counties and school districts usually adopt a budget each year. In many places the public can see the proposed budget and speak at a hearing before it's voted on. Rules vary by state.

Why it matters to you

Your taxes pay for the schools, streets and services you use every day. The budget is where leaders decide which needs get funded, and you can weigh in before it's final.

Myth vs. fact

What you can do

• Find your city's, county's or school district's budget online and look for its biggest spending category.
• Check when the next budget hearing is and plan to attend or send a written comment.
• Look at your property tax bill or ask your local tax office to see which local governments share that money.