Where do your taxes work?


I just got into an interesting discussion with someone who said, among other things, that she had no idea what percentage of her taxes paid for what services or programs. I was sort of shocked by this at first, but then got to thinking about it, and a lot of people probably don't know that (or they have major misconceptions about it). Due to the nature of my graduate degree and some of the jobs I've had, I actually have a pretty fair idea, and, more importantly, I know where/how to find that information, but I haven't really thought too much about it in recent years (being away from school and those jobs). So, I thought maybe it would make interesting blog fodder?

So, a tutorial. If you want to know how much you personally are paying to fund what, here is what you need to do.

Step 1: Determine your tax burden.
First, you need to know how much of your earnings you are paying to the federal government (for the sake of simplicity, we're going to keep this example all federal). You can find this on your tax return. I'll be the example:

As per my 2008 tax return, I paid $4,153 in federal income tax in 2008.

However, the federal government does have other sources of revenue. Personal income taxes only account for about half of total government income. The rest is made up of Social Security payments, payroll taxes, corporate income tax, excise tax, customs duties, estate taxes, etc. If you are like me, the only one of those that applies to you personally is Social Security, and you can get your paid in amount for that off your W-2.

As per my 2008 W-2, I paid $3,373.22 in Social Security withholding in 2008.

Finally, I also paid Medicare tax, which is separate from both income tax and Social Security. This is on the W-2 as well.

As per my 2008 W-2, I paid $788.90 in Medicare tax in 2008.

So, my total personal contribution to the 2008 federal government spending was $8,315.12. For the sake of whole numbers, we'll skip the $.12 and round to $8,315.

Step 2: Determine federal budget.
This is where things get trickier. Federal budgeting and federal spending are not the same thing, any more than your budget and you're spending are (or mine, anyway). A budget is what is planned to spend, not what is spent. That being said, if you are, like I am, looking at the last full year, you are likely to find more solid numbers for budgeting than for spending--it's easier to get your arms around. And, for the purposes a getting a general idea of where your money is going, it will work. So, we need to find the 2008 Federal Budget. The best place to do that, for my money, is the source itself--the GPO Access website. But, as you'd imagine, the federal budget is not exactly a simple document to navigate, and what we want is a simple breakdown. Luckily, someone has already provided that over at the lazy Internet sleuth's friend, Wikipedia.
(Pie chart courtesy of Skiddum, used with permission.)

Step 3: Do the math.
From here, it's simple math. Multiply the percentage of federal budget dollars spent in each category by the total you paid in. For me, it works out like this:

Social Security (21%): $1,746.15
Department of Defense (16.6%): $1,380.29
Medicare (13.3%): $1,105.90
Unemployment/welfare/other mandatory spending (11.2%): $931.28
Interest on the national debt (9%): $748.35
Medicaid and SCHIP (7.2%): $598.68
Global War on Terror (5%): $415.75
Health and Human Services (2.4%): $199.56
Department of Education (1.9%): $157.99
Other on-budget discretionary spending (1.8%): $149.67
Department of Veteran's Affairs (1.4%): $116.41
Other off-budget discretionary spending (1.3%): $108.10
Department of Housing and Urban Development (1.2%): $99.78
Department of Homeland Security (1.2%): $99.78
Energy (0.8%): $66.52
Department of Justice (0.7%): $58.21
Department of Agriculture (0.7%): $58.21
NASA (0.6%): $49.89
Department of Transportation (0.4%): $33.26
Department of Treasury (0.4%) $33.26
Department of the Interior (0.4%): $33.26
Department of Labor (0.4%): $33.26

Obviously, these numbers are only as helpful as you understand what each category represents. And there are some pretty big things left out. For example, the Iraq and Afghanistan Wars aren't funded through the budget, they are funded through special appropriations. So the $1,380.29 I gave the DoD last year? That's without my contribution to those wars.

Government budgeting is an extraordinarily (and maybe unnecessarily) complicated process. These estimates are very, very rough. Given time and resources, I could come up with better ones, but those would be rough too. However, even given its flaws, I this is a worthwhile exercise to get an idea of how much of your personal money goes where. For example, I'm not surprised by the amounts going to DoD and Social Security and the "War on Terror," but I had no idea I was paying $750 a year towards national debt interest, or only $160 on education. However rough they may be, those are enlightening (and horrifying) numbers.


This is very interesting. I had always thought that, by far, the largest portion of the Federal Budget went to what should be called "defense spending". And yet according to this information, Social Security is now the biggest chunk of the pie.

So are we actually spending more now on Social Security than on Defense, or is this just creative accounting? Given what you said about the Iraq and Afghanistan wars being left out of the budget for DoD, I couldn't help but notice that there is also a separate category for War on Terror (5%), Dept. of Veterans Affairs (1.4%), and Homeland Security (1.2%). In my mind, these should all be under the heading of "Defense Spending", but they are not. If you add them to the 16.6% allotted for DoD, then the total is 24.2%, which is only slightly more than the 21% allotted for S.S. But what about other discretionary spending, like the Iraq and Afghanistan wars? Is this really an accurate picture?

And as a side note, it is more than scandalous that NASA is getting more money than the Dept of Labor, Treasury, Interior, and Transportation. We're willing to spend more money fixing a solar panel on an aging space station than we are to fix or modernize our highways, or provide safe working environments for our people. That's just great.

Thanks, I've been Googling for this information for a while and it's hard to find.

One problem -- none of the sources, including yours, seems to recognize that Soc Sec is self-funding. It depends on money that the retirees have paid in over years. So it's not really fair to say 'our taxes' are paying it.

Even if we look at the fact SS current cash flow is slightly negative, still there has been a big reserve fund from years when there were more workers than retirees. (The problem is that Congress kept borrowing from this fund, and now SS needs them to repay what they borrowed.)

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