Where does your tax money go? What you're really paying for. (2024)

Tax season is finally over.

Millions of Americans got headaches trying to make sense out of our complicated and colossal tax code to finish their tax returns.

These last few weeks, Americans discovered how much of their hard-earned money is going straight into Washington’s coffers.

Whenever we file our taxes, we should remember we are the ones who fund the government. Washington should work for the people and not the other way around.

If you are irritated about the thousands of dollars the federal government takes from you, now is a good time to find out how Washington is spending your tax dollars so you can decide whether politicians are getting a bang for your buck.

Where does my tax money go to?

In 2021, the average American taxpayer paid $14,279 in income taxes. If we assume for a moment that’s the entire federal budget, this is how the government spent your money in 2023:

• Approximately 62% of all government expenditure goes directly to “mandatory” spending, social programs automatically funded without periodic congressional approval. That would be approximately $8,800 of your tax returns, distributed like this:
  • $3,000 for Social Security.
  • $2,000 for Medicare.
  • $1,427 for Medicaid.
  • $2,400 to other benefit programs
• The government spends approximately 11.5% ($1,642) of your money to pay for the interest on the debt.
• The rest of the federal budget —approximately 26.5% or $3,840— is spent on funding other government activities (defense, energy, education, agriculture, energy, etc.) and is the only piece of the budget that gets debated in Congress each year.

An overwhelming majority of your tax dollars are being used to finance benefits programs on the brink of insolvency or paying interest on our national debt.

The cherry on top: Congress doesn’t manage most of those programs regularly, nor the tax code

Congress’ failure to carefully administer almost 75% of current and future taxpayer money is a failure of representative government.

If you think Washington politicians aren’t making sound financial decisions with your money, wait until you hear about the national debt.

America has a debt problem

The federal government spends more than it collects from taxes and finances the difference by getting deeper into debt.

Just in 2024, the Congressional Budget Office estimates the federal government will spend $1.5 trillion more than it collected from taxes, and that borrowing is projected to rise to $2.5 trillion in 2034 even if major tax provisions sunset and appropriated spending is constrained.

This is unsustainable.

Right now the government is spending more than 75% of your tax return on benefit programs and interest on the debt. By 2034, the CBO estimates that all tax revenue will go to fund mandatory programs and debt payments, leaving the rest of the federal government dependent on debt.

Reckless government spending is already causing significant hardships for the American people. Washington’s decision to spend record amounts of money over the last few years forced the Federal Reserve to buy more debt, flooding the market with U.S. dollars, making them less valuable, and causing historic levels of inflation.

The longer Washington ignores our fiscal woes, the more painful the solutions are going to be. waiting for a crisis to deal with it will only risk economic and national security upheavals. The best way to solve this problem is to get well ahead of it now, so we can avoid much of that pain tomorrow.

It’s time for Congress to finally get a real budget

Getting the federal government back into healthy fiscal footing will require much hard work and won’t be easy. However, there is a first step Congress can take to start to right the course: they can finally do a real budget.

Congress doesn’t consider a comprehensive budget. Instead of passing a bill with all revenue and all spending, Congress focuses on 12 bills that fund less than 27% of the total federal budget.

This confusing process is not a good way for Congress to handle our tax money and makes it harder for Washington to put the government’s finances in order. It’s time to get a comprehensive budget bill that would:

• Get all 12 appropriation bills, mandatory spending, and revenue into one comprehensive budget bill.
• Use the knowledge of the Congressional committees and include them in the budget process.
• Help lawmakers understand the scope of federal expenditure and give them the tools to balance the government’s financial books.

Washington politicians are recklessly spending our money without a coherent plan. We need them to do better. A comprehensive budget each year would be a good starting point.