So…Where Does All of Your Tax Money Go To?

Filing your tax returns is never fun business, especially when you don’t really understand where your money goes. For the most part, Americans know that their tax dollars help the government pay for infrastructure such as roads and defense for the country. But exactly how much of their money goes towards these purchases? Nowadays, the answer can be found with the click of a button. As promised in the State of the Union, you can now visit http://www.whitehouse.gov/2012-taxreceipt the White House website and input your income tax details to see how the Federal government is spending your money.

So exactly how does the government spend the income tax of an average American family which makes $50,000 per year and consists of two parents and a child? Here is a listing of the departments that the government pays for with income tax payments:

National Defense - 24.64%

The primary job of a government is to protect its citizens, so it is not surprising that defense swallows nearly a quarter of the average family’s income tax. This includes the massive 10.26% that is currently being spent on ongoing operations in places like Afghanistan. While many see defense as a necessary big-budget item, others complain that America overspends: the US spends more on defense than the next 19 countries combined!

National budget estimates for 2013: http://comptroller.defense.gov/defbudget/fy2013/FY13_Green_Book.pdf

Health Care - 22.45%

Medicaid and Medicare make up most of the healthcare category which provides cheap health insurance for the elderly, the disabled and those receiving a low income. A small fraction of the health care budget is also spent on health research and disease control which helps to maintain a good quality of public health for all those in the United States.

More info about healthcare spending in the US: http://www.kaiseredu.org/issue-modules/us-health-care-costs/background-brief.aspx

Job and Family Security - 17.26%

The Job and Family Security section of your federal income tax receipt makes up most of the welfare which covers a wide array of safety-net programs. The largest item within this bracket however is actually retirement and disability benefits for federal military and civilian employees. These benefits ensure that everybody from soldiers to teachers has enough money to retire and live contently. This is followed by food and nutrition assistance (including SNAP, formerly known as food stamps) at 3.89% and unemployment insurance at 0.99%.

Breakdown of Job and Family Security section and other sections: http://www.whitehouse.gov/2012-taxreceipt


Net Interest - 8.01%

The government currently spends more on running the country than it receives back in taxes, meaning that the federal government currently runs a deficit in the borrowed. As you are probably aware from credit card bills or your mortgage, interest can be killer and there is no exception when it comes to sovereign debt. In the case of the US, 8.02% of the average family’s tax money is spent just on servicing the interest on loans the US government has taken out. 

More info about the Net Interest paid by the government: http://www.cbo.gov/publication/21960

Education and Job Training - 3.30%


Considering that education is supposed to be the silver bullet, a surprisingly small amount of tax money is spent on maintaining K-12 education, college financial aid and job training from federal income tax. This department also provides training and positions for those who have disabilities. This number can be seen as misrepresentation however, as some state taxes also go towards funding education.

Breakdown of Education and Job Training section and other sections: http://www.whitehouse.gov/2012-taxreceipt

Veterans Benefits - 4.53%

Veterans benefits is probably the one section of government spending that requires no squabbling, as looking after those who have served their country is seen by many as a duty and not as an option. In fact, many are arguing for spending on veterans benefits to be slightly included so as to quicken the process of veterans receiving their benefits, as currently the Department of Veterans Affairs does not use a computer filing system and therefore many needy veterans must wait months (if not years) to receive their due.

More information and detailed breakdown on Veteran Benefits: http://www.va.gov/opa/pressrel/pressrelease.cfm?id=2433

Natural Resources, Energy and Environment - 2.05%

Most of the energy and environment budget is spent on energy and environment concerns that most of us take for granted: reducing pollution, managing the nation’s water and undertaking conservation of our nation’s forests and protected areas. This section does contain some items that can be controversial: from the funding of renewable energy projects at one end and to the funding of oil pipelines at the other.

Breakdown of Natural Resources, Energy and Environment section and other sections:
http://www.whitehouse.gov/2012-taxreceipt

International Affairs - 1.72%

Most Americans think a much greater proportion of the federal budget is spent on international affairs than actual is with a tiny 0.8% of tax payers’ money being spent on development and humanitarian assistance. The figure for international affairs also includes the 0.5% that is spent on the essential components of foreign affairs like funding embassies and America’s participation in international organizations.


Detailed breakdown of the spending: http://www.state.gov/r/pa/prs/ps/2013/04/207281.htm

Science, Space and Technology Programs - 1.06%


Just over 1% of your tax bill is spent supporting scientific research, with that money roughly being split evenly between NASA and the National Science Foundation. As well as funding big ticket items like shuttle missions and probes, money invested in science in the US pays back dividends in all kinds of unusual ways. For example, the Internet was pioneered by NSF back in the late seventies.
Detailed breakdown of this sector and other sectors as well: http://whatwepayfor.com/default.aspx?f=2773


Additional Programs - 14.99%


The remaining items on the itemized federal tax receipt are small-ticket items that nevertheless are essential to the running of the USA, including the cost of law enforcement, response to natural disasters, and Additional Government Programs which includes the cost of running federal government and paying congressmen, senators and the President.

Author bio: This article was written by Simon a blogger, content manager, financial expert. He is a financially conscious guy with a Msc. in International Economics. He is a longtime contributor to various financial, accounting, taxation blogs among others the authoritative taxation and accounting blog of the Wallace&Associates APC Los Angeles a tax consulting services company.