Where Do Your Taxes Go? The 10 Main Ways the Government Spends Your Money
Federal government spending is closing in on $4 trillion a year. Even though a new administration is promising a wave of change, it’s still going to require a lot of money to keep the country running. A big chunk of that money comes directly from you, the taxpayer. The government gets most of its spending money via tax revenue, including $1.53 trillion via individual income taxes. Corporate income taxes, customs duties, and excise taxes are other big sources of cash for the government, as are Social Security and Medicare taxes and borrowing.
Those numbers are almost too huge to comprehend. Whether your tax bill is large or small, it probably seems like a drop in the bucket of total government spending. To help give people a better idea of where their tax dollars actually go, the National Priorities Project put together a taxpayer receipt that breaks down what the government does with your money. (The White House releases its own taxpayer receipt that categorizes spending in slightly different ways.)
That data can give you a good idea of how much of your tax dollars are flowing into specific spending categories. For example, the National Priorities Project’s data show the average taxpayer in the U.S. paid $12,992 in federal income tax in 2014. The bulk of those dollars went to only a handful of spending categories.
Those categories are fleshed out in a report from Pew Research Center, which breaks down where the government spends your money. On the following pages, we’ll use data from both the National Priorities Project and Pew Research Center to put together a picture of where your tax dollars go.
Let’s take a closer look at the 10 main ways the government spends your tax dollars.
1. Defense: 15%
Spending on the military and national defense consumes 15% of the national budget. It’s important to note, too, that this doesn’t count spending on veterans benefits. This chart, from the Council on Foreign Relations, shows just how dramatically our defense spending has increased since 2000:
Although spending took a downturn under President Barack Obama, Trump has signaled he wants to boost it significantly in coming years.
Next: Health care is big business for a reason.
2. Health care: 13%
There is no escaping health care costs. And incredibly enough, almost an equal portion of your tax bill goes to health care programs as it does to the military. About 45% supports Medicaid, the government’s health insurance program for the poor. The rest funds things, such as the Children’s Health Insurance Program and consumer health programs.
Overall government health care spending has ballooned over the past 40 years. For comparison, in 1976, spending on health programs accounted for 7% of the federal budget.
Next: Don’t forget about those interest payments.
3. Interest payments: 6%
This is basically the maintenance cost we end up spending on our national debt. The national debt is always a topic of discussion, and with the turbulent times over the past couple of decades, it’s risen dramatically. Today, the U.S. has nearly $20 trillion in national debt. And just like you have to pay interest on your credit card and mortgage debt, you’re also paying interest on your share of the federal government’s debt.
Next: Someone has to pay for federal retirements.
4. Income security: 13%
This category, which eats up 13% of the federal budget, includes retirement and disability benefits for federal employees, job training programs, and other similar programs. Among them is the Temporary Assistance to Needy Families program, which provides cash benefits and other support to the poor. In 2013, that program’s spending was $17 billion, the lowest amount since the program started in 1998, according to the Congressional Budget Office — so that’s a promising sign for deficit hawks.
5. Benefits for veterans: 5%
There are roughly 22 million veterans in the U.S., according to the Department of Veterans Affairs. Spending on benefits for people who have served in the military, including pensions and medical care, has increased steadily in recent years, nearing $100 million back in 2009. That number has gone up even as the total number of veterans has declined, according to data from the National Center for Veterans Affairs and Statistics.
6. Education: 3%
A lot of people would feel better if we spent more on education, rather than defense. But our policymakers seem to be headed in the opposite direction. There have been many cuts to education spending in recent years, while spending on defense has grown. Currently, per Pew’s numbers, we spend 3% of our federal tax dollars on education. A key problem, however, is our spending doesn’t always translate into success.
7. Social security: 24%
Spending on social security is, by a long shot, the single largest expenditure for the federal government. According to Pew Research, government spending on social security eats up roughly a quarter of the entire federal budget. And, with the Baby Boomer generation retiring and signing up, those costs are expected to grow. This is an area that needs a fix. But as we know, it’s the “third rail” of American politics — meaning nobody is willing to touch it.
8. Medicare: 15%
Medicare eats up a significant portion of the federal budget at 15%. This is one of those health care-related expenditures that is expected to continue ballooning in coming years — and one that will require some type of reform to fix. Medicare is, of course, incredibly important for a huge portion of the American population, so it’s not as easy as making draconian cuts.
9. Foreign aid: ~1%
The Pew report doesn’t look at foreign aid specifically and instead counts it as a portion of another category. We’ve taken it out, as it’s one of the most misunderstood elements of the federal budget. Many people believe we spend a lot — the average American guessed 31% of the federal budget — on foreign aid. The real amount? It’s roughly 1%. Clearly, people have an incredibly warped idea of how many of our tax dollars head overseas.
10. Other: ~5%
As noted, we’ve removed foreign aid from this figure. Otherwise, this is the catch-all that accounts for the remainder of government spending, which is roughly 5% of the total. This includes “crop subsidies, space travel, highway repairs, national parks, and much, much more,” the Pew report said. So, if you can think of something that wasn’t included in any other category, it’s accounted for here.
Additional reporting by Megan Elliott.