A look at where your tax money goes...
Taxman (by the Beatles)
Yesterday was tax day, and let’s be real, no one likes paying taxes – or at least I haven’t met anyone that does. Displeasure with taxation is far older than the Boston Tea Party and goes back to biblical times when tax collectors were described in the same vein as sinners and prostitutes.
[Matthew 21:31-32] "Truly I say to you that the tax collectors and prostitutes will get into the kingdom of God before you.”
“Now all the tax collectors and the sinners were coming near Him to listen to Him.”
Mo Money Mo Problems (by Notorious B.I.G.)
But the trillion dollar question is - where does the tax money go? Let’s take a look and see if we can figure this out. But before we begin, let’s layout the context and assumptions. First it’s important to note that according to the Congressional Budget Office last year (2016) the U.S. collected roughly $3.3 Trillion in revenue and spent roughly $3.9 Trillion in expenses. The $600 billion deficit was in large part financed by debt (both public and foreign debt). Since we cannot be sure which program was funded by tax dollars and which program was funded by debt, let’s just presume all programs were equally funded by a proportionate percentage / mix of revenue dollars and debt.
Of the approximate $3.3 Trillion in revenue, $1.5 Trillion was from Individual Income Tax, $300 Billion was from Corporate Tax, $1.1 Trillion was from Payroll Tax and the rest is from “other” which includes Excise Taxes, Customs, Duties, etc.
Money (by Pink Floyd)
With that said, here’s a break-down of government spending:
$910 Billion – Social Security
$692 Billion – Medicare
$368 Billion – Medicaid
$584 Billion – Defense
$241 Billion – Interest
$563 Billion – Mandatory “Other” Spending
$600 Billion – Discretionary “Other” Spending
The last 2 buckets of spending are the ones that we seem to have the least amount of insight into, so let’s see what’s included in these “Other” areas, which amounts to almost 30% of the total Budget.
Of the $600 Billion in Nondefense Discretionary spending, according to the 2015 analysis (I was not able to find the 2016 analysis) the breakdown is as follows:
9% in Diplomacy and International Affairs
11% in Law enforcement and Government
12% in Science, Environment, and Energy
14% in Economic Security
21% in Health care and health research
18% in Transportation and Economic development
15% in Education and Training
Of the $563 Billion in Mandatory “Other” Spending, $363 Billion is what is sometimes referred to as “Safety Net” programs. According to the CBPP (Center on Budget and Policy Priorities), these programs include: the refundable portions of the Earned Income Tax Credit and Child Tax Credit, which assist low- and moderate-income working families; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income for the elderly or disabled poor and unemployment insurance; various forms of in-kind assistance for low-income people, including SNAP (food stamps), school meals, low-income housing assistance, child care assistance, and help meeting home energy bills; and various other programs such as those that aid abused and neglected children.
The CBPP says such programs keep millions of people out of poverty each year. A CBPP analysis using Census’ Supplemental Poverty Measure shows that government safety net programs kept some 38 million people out of poverty in calendar year 2014. Without any government income assistance, either from safety net programs or other income supports like Social Security, the poverty rate would have been 27.3 percent in 2014, nearly double the actual 15.3 percent.
The remaining $200 Billion of the Mandatory “Other” Spending appears to be for Benefits for federal retirees and veterans, though I was not able to verify that through the reports I read.
Me and the I.R.S. (by Johnny Paycheck)
So what does this mean? Where does my tax money go? Well if we extrapolate the math above, a single dollar ($1.00) is broken down as follows:
$0.27 is for Medicare and Medicaid
$0.23 is for Social Security
$0.15 is for Defense
$0.09 is for “Safety Net” Programs
$0.06 is for Interest on U.S. Debt
$0.05 is for Federal Retiree and Veteran Benefits
$0.03 is for Healthcare and Health Research
$0.03 is for Transportation and Economic Development
$0.02 is for Law Enforcement
$0.02 is for Science, Environment, and Energy
$0.02 is for Economic Security
$0.02 is for Education and Training
$0.01 is for Diplomacy