In this season of giving thanks, we want to show our appreciation for you and the taxes that fund the programs, departments, and the liberties that we have each and every day. So here it is for your holiday reading: the benefits of taxes and where everything goes.

Taxes have been around in some fashion since the beginning of civilization, and in the US today, they support a complex system of programs and fund various federal departments. In fact, the 2014 Federal Budget was 2,502 pages, which often leaves people wondering, “Where does my tax money go?"

Understanding Taxes and Programs

Every person has been frustrated or in need of assistance from a federal or state department at some point, and wondered, “Where are my taxes at work?” or “Where does my tax money go?” Let’s take a look at where your money goes in lens of a common receipt, and imagine each of the following are a section in the grocery or department store:

  • National Defense – Personnel salaries and benefits; ongoing operations and supplies; research and development; construction and support; Atomic energy defense activities; and Defense-related FBI activities
  • Health Care – Medicaid and Children’s Health Insurance Program (CHIP); Medicare doctor payments and prescription drug payments; health research and food safety; disease control and public health services; and additional health care activities
  • Job & Family Security – Unemployment insurance, food and nutrition assistance programs, housing assistance, Earned income, Making Work Pay, and child tax credits, supplemental security income, federal military and civilian employee retirement and disability, child care, foster care, and adoption support; and other programs
  • Education & Job Training – Elementary, secondary, & vocational education programs; college financial aid; job training and employment services; employment programs for those with disabilities; and other educational and job services
  • Veterans’ Benefits – Income and housing support; health care costs and programs; education and training programs; and other benefit services
  • Natural Resources, Energy, & Environment – National Parks Service, Water and Land management; energy supply and conservation, environmental protection programs; and other energy and natural resource-related programs
  • International Affairs – Development and humanitarian assistance programs and funds, security assistance; Foreign Affairs, embassies, and various related programs
  • Science, Space, and Technology – NASA programs and research and the National Science Foundation

The Experiment – Watch Where it Goes

So we have our departments, now using the 2013 Taxpayer Receipt, let’s look at a real life scenario.

The Allen family are filing Married Jointly, and claiming their one child.  For ease, we’ll say their household income is $50,000 and they pay about two percent of their wages into an IRA, do not itemize, claim the Child Dependent Credit, and claim the Saver’s Credit.  Looking at their W-2, they will pay $3,100 into Social Security, $725 into Medicare, leaving $1,776 as their liable income tax.  Let’s take a look at exactly where their taxes go:

  • $440.27 – National Defense-related programs
  • $447.37 – Health Care-related programs
  • $333.36– Education and Job Training-related programs
  • $153.45– Net Interest paid to holders of U.S. Treasury securities
  • $96.61 – Veterans’ Benefits
  • $36.59– Immigration, Law Enforcement, & the Administration of the Department of Justice
  • $34.10– Natural Resources, Energy, and Environmental-related programs
  • $32.32– International Affairs-related issues and programs
  • $20.42– Agriculture-related programs
  • $20.07– Science, Space, & Technology-related programs
  • $15.98– Programs & Departments for Natural Disasters response
  • $6.57– Community, Area, and Regional Development initiatives & programs
  • $88.44– Other Discretionary Government Programs (Commerce, Transportation, Administration, etc.)

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