How the Government Spends Your Tax Dollars

The White House website has an interesting interactive page where you can go and look at how and where your federal tax dollars are spent.  Since people are always complaining about paying taxes, especially in regards to their pre-conceived notions about how those tax dollars are being used by the government, I thought it would be instructive to take a close look, based on this information from the government's website, about where, exactly your tax dollars go.  

The following information is based on 2013 tax and spending receipts, and is based on a married couple with two children who make $80,000 per year.  Let's call this family the Smith Family.  

The biggest single category that the Smith's 2013 income tax dollars went to was Medicare.  $484.89, or about 11% of their total income taxes paid, went to support Medicare payments to doctors and pharmacies.

Almost as much, $467.09, went to Medicaid (which provides basic health care services for poor people and children).  

Another $140 or so went to various other healthcare-related services, for a grand total of $1,093.50, or about 25% of the Smith's total income tax expenditures.  

Almost the exact same amount - $1,076.13, or another 25% of the Smith's tax dollars - went to various programs falling under the category of National Defense.  That category basically includes everything related to the U.S. military and its active operations and expenditures.  I stress the word "active" because it does not include Veteran's Administration costs or military retirement and disability programs.  Those two categories fall under a different heading.  The Smith's spent $213.15 on Veteran's benefits (including healthcare and income and housing support), and $224.00 on military retirement and disability benefits.  

Therefore, the total expenditures related to the military and its services, was about $1,500.00, or roughly 35% of the Smith's total income tax dollars - making it by far the largest category. 

The next category is what we generally think of as "welfare."  It includes a number of programs, including Unemployment Insurance ($23.44 for the Smith's in 2013), food stamps and school lunches for poor kids ($168.86), Supplemental Security Income, which pays for assistance to elderly poor and disabled people ($91.60), and Temporary Assistance to Needy Families, which is your basic welfare check to poor people ($30.39).  That's right, the infamous welfare check cost this family of four, making a household income of $80K per year, exactly thirty dollars in 2013.  

The total expenditures for the Smith family in this "welfare" category is $814.81. However, this category includes the aforementioned military retirement and disability program, and that's actually the largest program in this category.  It also includes retirement programs for railroad workers, child care, foster care, and adoption support, and spending related to various tax credits.  

What that means is that the total amount that the Smith family paid for actual federal welfare programs in 2013 was $314.29.

What remains after these large categories are a number of smaller categories like water and land management, environmental protection, educational programs, international affairs, including support of U.S. embassies abroad, border security, the federal judicial system, and natural disaster support funding.    

All told, the Smith family spent about $4,300.00 in income taxes in 2013.  Defense expenses, together with Medicare and Medicaid, accounted for almost exactly half of these dollars - about $2,200.00.  Adding in Veteran's Administration spending and military pensions, the amount goes up to about $2700.00, or about 60% of the total.  The remainder was divided up among several dozen smaller categories.

In addition to these federal income taxes, the Smith's, of course, also paid $4,960.00 for Social Security, and $1,160.00 for Medicare.  This second Medicare tax is separate from the $484 the Smith's paid to support Medicare payments to doctors and pharmacies.  This Medicare tax, which is taken separate from income tax, supports hospital services.  

In the end, the vast majority - almost 50% of the total - of the Smith's federal taxes went to Social Security.  About 20% went to Medicare and Medicaid.  About 15% went to Defense, military, and veteran spending.  

Those three categories alone - Social Security, Medicare/Medicaid, and Defense/Veterans - account for about 85% of the total federal taxes paid by the Smith's in 2013.  

Every single other federal government spending category is spread out among the remaining 15% of the Smith's tax expenditures.  Perhaps most significantly, roughly 3% of the Smith's total went to various federal welfare programs.  Only 0.3% (30 dollars) went to TANF, or the infamous "welfare check."  

I hope you'll keep these facts and figures in mind the next time you start to feel righteous indignation in how the federal government is spending your tax dollars.  It might also be important to remember that the government spends a great deal of money on so-called "corporate welfare," which is comprised of grants and subsidies to businesses.  This spending is categorized differently from other government spending and is therefore not included in the above analysis of how individual tax dollars are spent.  However, you should keep in mind that the U.S. government spends about 100 billion a year in these corporate subsidies, which averages out to about $6,000 per family in the United States.