If you earned 100 pounds and had to give 20 of it to the government, you would want to know exactly where those 20 pounds went, right?
Most people think taxes are just a boring bill adults have to pay, but they are actually the way we buy things as a society. By looking at the government budget, we can see exactly how our money transforms into the world around us.
Imagine the entire country is one giant club. To keep the clubhouse clean, pay for the electricity, and buy snacks for everyone, every member has to pay a membership fee. That is essentially what taxes are. But because this 'club' is a whole nation, the shopping list is massive.
When the government collects taxes, they create a budget. This is a plan that decides who gets what. If you want to understand what your country cares about, you just have to look at where they spend their tax money. It is like looking at a person's receipts to see what their hobbies are.
Taxes are what we pay for civilized society.
The Big Three: Where Most of the Money Goes
While every country spends its money a little differently, most governments have a 'Big Three' list of expenses. These are the heavy hitters that take up more than half of all the tax money collected.
First is Social Protection. This is often the biggest slice of the pie. It includes money for people who are retired (pensions), people who are too sick to work, or families who need extra help to buy food and pay rent. It is a safety net to make sure nobody falls too far behind.
Second is Healthcare. This pays for doctors, nurses, hospitals, and medicine. In countries like the UK, the government pays for almost all healthcare through taxes. In other places, tax money might only pay for healthcare for specific groups of people, like the elderly or the very poor.
In some countries, like Norway and Sweden, taxes are much higher than in the UK or US, but college and university are completely free for students. The citizens choose to pay more in taxes to make sure education costs nothing!
Third is Education. This is the money that builds your school, pays your teachers, and buys the computers in your classroom. Without tax money, every family would have to pay thousands of pounds every year just to send their kids to primary school.
Finn says:
"So, if my school gets a new playground, is that basically a gift from everyone in the country who pays taxes?"
Comparing the Receipts: UK vs. US
Not every country agrees on how to spend its 'club fees.' For example, the United States and the United Kingdom have very different priorities. If you look at their budgets side-by-side, you can see what each culture values most.
In the UK, a huge portion of tax goes to the NHS (National Health Service). Because the UK believes healthcare should be free for everyone at the point of use, they put about 20% of their budget into it.
In the US, a much larger slice of the pie goes to Defence. The US spends hundreds of billions of dollars on the military, ships, and airplanes. While the UK also spends money on its army, the US makes it a much higher priority compared to other things like transport or housing.
Imagine a town with no taxes. There are no bin collectors, so rubbish piles up. There are no streetlights, so it is pitch black at night. If your house catches fire, you have to negotiate a price with the fire brigade before they start spraying water. Taxes make sure these basics are always ready for everyone.
Tracing Your Own Tax: The Video Game Example
Even if you don't have a job yet, you are probably already paying taxes. In many places, there is a tax on things you buy, like toys, clothes, or digital games. In the UK, this is called VAT (Value Added Tax).
Let's say you save up your pocket money and buy a new video game for £40. You might think all that money goes to the game developer, but it doesn't. Roughly £6.67 of that price is actually tax that goes straight to the government.
When you buy a £40 game in the UK: Price of game: £33.33 VAT (20%): £6.67 Total you pay: £40.00 If the government spends that £6.67 like the national average: £2.30 -> Pensions and Benefits £1.33 -> Hospitals and Nurses £0.80 -> Schools and Teachers £0.33 -> Police and Fire £1.91 -> Everything else (Roads, Science, etc.)
Instead of just disappearing, that £6.67 gets split up. Based on average government spending, about £2.30 of your game purchase might go toward social support, £1.30 might go to a hospital, and 80p might help fund a school. Even your hobbies are helping to fix potholes in the road!
Mira says:
"Exactly! It's like we're all chipping in for a giant 'Starter Pack' for every kid in the country, no matter where they live."
Public Goods: Things We All Share
One of the coolest things tax money buys is something economists call Public Goods. These are things that are almost impossible for one person to buy on their own, but everyone gets to use them once they exist.
Think about a streetlight. It would be very expensive for you to buy a streetlight just for the patch of pavement outside your house. And it would be weird to tell your neighbors they aren't allowed to use your light!
- Infrastructure: Roads, bridges, and tunnels that connect cities.
- Safety: Firefighters who come to help if there is a fire, even if you've never paid them directly.
- Environment: National parks and clean air regulations that keep the planet healthy for everyone.
Who Holds the Credit Card?
Since the government is spending billions of your 'club fees,' you might wonder who gets to decide what to buy. The answer is: the people we vote for. This is the democratic connection.
When adults vote in an election, they are often choosing between different spending plans. One politician might want to spend more on green energy to fight climate change. Another might want to spend more on the police or building new motorways.
Finn says:
"Wait, so if I don't like how the money is being spent, I have to wait until I'm 18 to vote for a different 'shopping list'?"
The budget is not just a collection of numbers, but an expression of our values and aspirations.
The Great Debate
Because there is only a limited amount of tax money, people often disagree about how to use it. This is a normal part of living in a society! Some people think taxes should be lower so people have more of their own money to spend. Others think taxes should be higher so the government can provide better services for everyone.
The government should use tax money to explore space, build high-tech robots, and fund new inventions that could help the future.
The government should use tax money to fix every pothole, improve bus routes, and make sure existing parks are perfect right now.
There is no 'perfect' answer. Every country is constantly adjusting its budget based on what its citizens think is most important at that time. By understanding where the money goes, you get a say in that conversation when you grow up.
In this world, nothing is certain except death and taxes.
Something to Think About
If you were the leader of your country for one day, which part of the budget would you increase, and which would you decrease?
There are no wrong answers here. Your choice shows what you think is most important for a happy and successful community.
Questions About Money & Society
Why don't we just pay for things ourselves when we use them?
Does the government ever run out of tax money?
Is it fair that some people pay more tax than others?
You're a Shareholder in Your Country!
Now you know that taxes aren't just money disappearing into a black hole. They are the way we buy the world we live in. Next time you see a library, a park, or a fire engine, remember: a tiny piece of that belongs to you and your family! To see how the government manages the actual coins and notes, check out our page on [money-and-government].
