Where Your Money Goes: What Do Federal Taxes Pay For?

Every time payroll is completed, you have taxes taken out of your paycheck. These income taxes go toward federal programs and services and help fund government spending. Every 12 months, a budget is created that determines what the federal government plans to spend on each program in that fiscal year. Individual income taxes, as well as Medicare, Social Security and business taxes, all contribute to government revenue.

Since a chunk of your hard-earned money goes to support the government each year, you may want to know what specifically your dollars are helping fund.


So how do these individual programs and services use the money? Types of spending for the programs that receive the most of your tax money are detailed below.

Military and Federal Defense

The greatest portion of your tax dollars are spent on military support. This not only includes funding for the Department of Defense and equipment and vehicle purchases, but also pay for military personnel and soldiers.

Interest on Federal Debt

Because the federal government has spent more than it has collected in recent years, it has had to borrow money to cover the cost of spending. In the last 40 years or so, the national debt has been increasing. While spending less can help the government stop adding to the problem, even if that were to happen, the current debt must still be paid back. For this reason, a portion of your income taxes go toward paying back lenders.

Social Security and Unemployment

While Social Security is a large piece of the national budget, it is the fourth in line to take revenue from income taxes. Social Security provides benefits to retired workers, their spouses and their children, surviving spouses and children of deceased workers, and disabled workers and their dependents.

Health Care

Health care is a very close second on the list of services your tax dollars go toward each year. Your contributions provide a lot of funding for health insurance programs, including the Children’s Health Insurance Program, Medicare, Medicaid and the Affordable Care Act marketplace subsidies. Money is also spent on health research, public health services, food safety and disease control.