Here’s where your tax dollars really go

It’s April 15, which means that you’ve paid your tax bill– or you will very soon– and you might be wondering about what exactly the government is going to do with your hard-earned cash.
To help taxpayers feel (slightly) better about writing those big checks, the White House updated its federal taxpayer receipt, a tool that helps people see where their tax dollars actually go. Taxpayers can type in how much they paid in Social Security tax, Medicare tax and income tax and see a breakdown of how much of what they paid might go toward say, veteran benefits (5.4%) versus unemployment insurance (0.54%). “Regular people like us, we are paying these bills and we need to have more of a say on where these tax dollars are being spent,” says Jasmine Tucker, a research analyst with the National Priorities Project, a federal budget research organization that also offers a personalized tax receipt tool to help people estimate how their tax dollars are being spent.

Turns out, a lot of Americans are confused about how the government spends their tax dollars. A 2011 survey by the Pew Research Center found that only 30% of Americans knew that the government spent more on Medicare than on scientific research, education or interest on the national debt. And after being shown data on how much the government spends on defense, three out of five people said it was more than they expected, according to a 2010 study by the Program for Public Consultation, a group that gathers public opinion of government policy.
Some people may have a good sense of what the big ticket items are — about 25% of the budget goes to national defense and another 25% goes to health care programs like Medicare and Medicaid. But some people may be surprised to see what percentage of overall spending goes to areas like education, which accounts for less than 3% of overall spending, and natural disasters, which takes up 0.9% of the budget.“What people don’t understand is the extent to which the major expenditures dwarf other parts of the budget,” says David Brown, an economic policy adviser for Third Way, a centrist think tank based in Washington, D.C.
Another thing that shouldn’t get overlooked on tax day is the value of popular tax breaks Americans use to lower their bills, says Brown, which he says are also technically considered federal expenses — and pretty large ones at that. For example, the $120 billion spent on housing related tax breaks such as the mortgage interest deduction, the deduction for property taxes, and the exclusion on gains for selling a home amount to more than the government spends on education, training, employment services, science, research and technology combined, says Brown.
Some groups are hoping that greater awareness of how tax dollars are spent, combined with a broader understanding of how the 1040 works and how the tax code has changed, will help people make more educated decisions when it comes to which candidates they vote for on election day.