Every year, millions of Americans file their taxes, contributing to the revenue that fuels federal government programs and services. But have you ever wondered where exactly your tax dollars go? Let’s take a closer look at how the U.S. government allocates taxpayer money and what percentage goes toward various functions.

Social Security: 20%

Social Security is the largest single expenditure of the federal government. This program, established in 1935, provides benefits to retirees, disabled individuals, and survivors of deceased workers. In fiscal year 2023, about 20% of the federal budget was spent on Social Security, making it the most significant portion of government spending.

Medicare, Medicaid, and CHIP: 25%

Medicare, Medicaid, and the Children's Health Insurance Program (CHIP) collectively make up 25% of the federal budget. These programs provide health care coverage to seniors, low-income families, and children.

Medicare primarily covers people aged 65 and older and individuals with certain disabilities.

Medicaid serves low-income individuals and families, and CHIP helps provide low-cost health coverage to children in families who earn too much to qualify for Medicaid.

National Defense: 13%

Defense spending accounts for about 13% of the federal budget. This portion goes toward funding the Department of Defense, which covers military personnel, equipment, operations, and research. The defense budget also includes some funds allocated for veterans’ benefits and overseas contingency operations.

Income Security Programs: 11%

Income security programs include a wide range of initiatives designed to provide financial assistance to low-income families and individuals. These programs cover unemployment insurance, food stamps (SNAP), housing assistance, child tax credits, and Temporary Assistance for Needy Families (TANF). Combined, these programs account for 11% of federal spending.

Health Programs (Non-Medicare/Medicaid): 11%

This portion of the budget funds non-Medicare/Medicaid health initiatives, such as research and public health programs. It includes organizations like the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), and other health-related federal agencies.

Interest on National Debt: 7%

The U.S. government borrows money to finance its activities, leading to national debt. In 2023, about 7% of the budget went to paying interest on this debt. As the national debt grows, so does the interest payment, which can crowd out other spending priorities.

Veterans’ Benefits: 7%

Veterans’ benefits account for roughly 7% of the federal budget. These funds go toward health care, education, housing, and financial assistance programs for veterans and their families. The Department of Veterans Affairs (VA) is responsible for administering these services.

Education: 6%

Education spending includes funding for K-12 schools, higher education, vocational training, and special education. The federal government plays a limited role in education (most of which is funded by state and local governments), but still allocates about 6% of its budget to support education initiatives.

Transportation: 3%

The federal government invests in the nation’s transportation infrastructure, including highways, airports, and mass transit systems. About 3% of the budget is spent on these transportation initiatives, helping to maintain and improve the U.S.’s roads, bridges, railroads, and public transportation systems.

Law Enforcement, International Affairs, and Other: 6%

The remaining 6% of the federal budget is allocated to various programs, including:

• Law enforcement (FBI, DEA, and other federal agencies)

• International affairs (foreign aid, diplomacy, and military assistance to other nations)

• Environmental protection (EPA and related initiatives)

• Housing and community development

Other general government operations

Understanding where U.S. tax dollars go helps provide transparency and insight into the priorities of the federal government. While Social Security, health programs, and defense make up the majority of spending, various other programs, including income security, education, and veterans’ benefits, also rely on significant tax revenues.

With ongoing debates about budget deficits and national debt, there are constant discussions about how to adjust this allocation to ensure financial stability while meeting the needs of the public.

Federal Spending Breakdown (Percentage of Budget)

• Social Security: 20%

• Medicare, Medicaid, CHIP: 25%

• National Defense: 13%

• Income Security Programs: 11%

• Health Programs (non-Medicare/Medicaid): 11%

• Interest on National Debt: 7%

• Veterans’ Benefits: 7%

• Education: 6%

• Transportation: 3%

• Law Enforcement, International Affairs, Other: 6%

By knowing where the federal budget is spent, taxpayers can better engage in the national conversation about fiscal responsibility and policy priorities.