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Where Do Your Tax Dollars Go?

The U.S. tax system attempts to ensure that everyone contributes their fair share to the working of the government and national economy. The taxes you pay are used by the government to invest in the country and provide goods and services to the American people.

The three largest categories of expenditures are major health programs, Social Security, and defense and security. Interest on the national debt and various safety net programs such as low-income assistance comprise a sizable chunk of national expenditures, while other categories such as transportation and infrastructure spending round out the government budget.

Defense and Security

Defense and Security typically constitute a significant portion of government expenditures although the amounts fluctuate annually, along with the rest of the budget. In 2023 defense spending equaled about $891 billion.

Defense and security spending is considered a discretionary part of the federal budget and includes the expenses of the Department of Defense and Homeland Security Agency. The Department of Defense’s spending goes toward the military in categories such as operation and maintenance, military personnel, procurement, and research, development, test and evaluation. Homeland Security spends money on things like the Federal Emergency Management Agency, Customs and Border Patrol, the U.S. Coast Guard, the Transportation Security Administration (TSA), the United States Secret Service, Federal Law Enforcement Training, and Cybersecurity and Infrastructure.

Social Security

Payments for the Social Security system constituted about 21% of the 2023 federal budget with expenditures of about $1.3 trillion. The Social Security system administers retirement, disability, survivor, and family benefits, and enrolls individuals in Medicare. About 67 million U.S. residents are collecting Social Security benefits. The system also provides Social Security Numbers, which are unique identifiers needed to work, handle financial transactions, and determine eligibility for certain government services.

Major Health Programs

The major health programs in the federal budget are Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). About two-thirds of the federal health program budget goes to Medicare and Medicaid and CHIP require matching payment from individual states. For 2023, about 25% of the federal budget went toward these programs.

Medicare is federal health insurance for people 65 or older, and some people under 65 with certain disabilities or conditions. Nearly 66 million people are enrolled in Medicare. Medicaid is a joint federal and state program that help cover medical costs for those with limited income and resources. Approximately 83 million people are enrolled in Medicaid. CHIP is an insurance program that provides low-cost health coverage to children in families that earn too much to qualify for Medicaid but not enough to purchase private insurance. In some states, CHIP covers pregnant women as well. Nearly 7 million people are enrolled in CHIP.

Safety net programs

Safety net programs typically constitute about 11% of the federal budget. This category includes critical support programs for low – and mid-income families that are not a part of Social Security or the major health programs. Some examples of Safety net programs include Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Housing Assistance, and Child Care and Development Fund (CCDF).

National Debt and Other Spending

In 2023, interest on the national debt totaled about $640 billion or about 7% of total expenditures. 

Approximately 23% of the federal budget goes into other categories of spending such as benefits for federal retirees and veterans, scientific and medical research, transportation, infrastructure spending, education, non-security international spending, and more.


Sources: turbotax.com, usaspending.gov
Material is provided for educational purposes only. Although this material is derived from information which we believe to be accurate, we cannot guarantee its accuracy.