Where do my income tax dollars go?

John W. Schoen • Profile • E-mail

You worked hard for that money you just sent off to the IRS. So like many tax filers, including Mark in Colorado, you're probably asking yourself: Just where, exactly, does my money go when the government gets its hands on it? Let's see who gets what.

Don't forget, you have two extra days this year to send in your check — one because April 15th falls on a Sunday and another day because of two holidays that aren't on most people's calendars. Which got Lloyd in Louisiana wondering: what's up with these late deadlines?

What does all our income tax money go to pay for?
— Mark, Greeley, Colo.

If you have trouble balancing your checkbook, imagine trying to keep track of where $2.7 trillion goes every year. Even with armies of government accountants and auditors, it’s hard to know with certainty exactly where your income taxes end up. But you can get some idea from the government’s accounting of where it went last year. 

For the complete, gory details, you can check the latest estimates from the official budget on the Government Printing Office Website, where you’ll find the government’s finances sliced and diced — by agency, department, function and source — with historical data back to the 1940s and beyond.

What you’ll also find is a lot of big numbers. So to give you some sense of proportion, here’s — roughly — how the federal budget compares to your budget and mine.

Let’s assume you make $52,000 a year — or $1,000 a week — which is about the median household income in the U.S. The real number was $46,326 in 2005, but give us a break with the math, okay? Remember, that $1,000 a week is tax free. (Hey, you’re the government.)

Here's where it went (we used 2006 figures from Table 3.2, "Outlays by Function and Subfunction"):

Last year, the three biggest federal budget items were Social Security, health care and defense spending — each of which ate up about $200 of your $1,000 weekly paycheck.

Even though you may not have health insurance, about $219.40 of every $1,000 of your taxes went to pay for health care last year. On an annual salary of $52,000, that works out to $11,408.80 a year. The biggest chunk of that ($124.20 per thousand) went to pay for Medicare, which provides health coverage for people over 65. The rest ($95.20) went for Medicaid, which covers low-income families and individual, and state administered health coverage for children.

While most households are having a hard time setting aside a few bucks a month for their IRAs, your government is busy stashing away retirement cash for a rainy day; some $206.60 of the weekly paycheck went to the Social Security fund — most of which is officially “off budget.” (But let’s not get started on that whole lock-box thing.)

Next up is military spending. This includes a variety of defense costs, including salaries for the troops ($48.00); operating and maintenance costs ($76.70); “procurement” — which means stuff you bought ($33.80) — and research, development, test and evaluation of all those things you bought ($25.80). Throw in $12 or so for things like “atomic energy defense activities” and housing the troops, and you paid $196.50 to keep the world safe. (Or $10,218 for the year.)

Unfortunately, Uncle Sam — like many Americans — has been living beyond his means and spending more than he takes in. To make up the difference, the Treasury steps up by selling more debt — roughly the same as you or me using our credit cards. And like most credit card users, Uncle Sam isn’t paying back that debt, he’s just making the minimum monthly payment. So interest on the Treasury’s credit card eats up $122.20 of Uncle Sam’s $1,000 paycheck. That bill is cut by $36.80, thanks to the interest that the government pays itself for Treasury debt that it keeps “off-budget.” (Again, let’s not go there.)  Your net interest payment amounts to $85.30.

There’s also a line in Uncle Sam’s budget for $132.70 for “income security” which includes things like unemployment insurance ($12.70); food and nutrition programs ($20.30), and housing assistance ($14.40). Also tucked into this line item is the cost of retirement for federal workers ($37.00).

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