Breakdown of the Individual Income Tax Dollar:
Our nation’s budget is composed of Federal Funds and Trust Funds. Trust Funds, generated from sources such as payroll taxes, are earmarked for specific programs such as Social Security, Unemployment Compensation and Railroad Retirement. All other funds are Federal Funds, and income taxes are allocated to the Federal Funds part of the budget. The chart found on Page 1 of Where Do Your Tax Dollars Go? is based on the functions and subfunctions (government categories of how the funds are used) within the Federal Funds portion of each government agency budget found in the Budget of the United States Government, Fiscal Year 2012, the Public Budget Database.
The breakdown of Federal Funds is based on estimated outlays (as opposed to budget authority) for fiscal year 2010 since this most closely corresponds to your tax filing in 2011 for income earned in calendar year 2010.
The distribution of Federal Fund spending is calculated as follows: Looking at Total Outlays for 2010, Trust Fund accounts are separated out. Everything else is a Federal Fund account. NPP sums Federal Fund outlays first by subfunction and then by NPP code. Total Federal Fund outlays come to $2,663 billion in 2010. However, spending on "Government" is negative $24 billion this year, due to repayments of TARP loans. In order to give readers a better sense of the actual costs of government, we have not included the $116 billion in TARP repayments. Including them would give the impression that ordinary Government functions cost nothing.
Estimated total Federal Fund outlays for fiscal year 2010 were $2,663,375,000,000.
We have defined the categories in the bar chart as follows:
Military: $763,453,000,000. National defense and security, nuclear weapons activities, and international security assistance. This includes subfunctions 051, 053, 054, 152.
Health: $598,614,000,000. Medicare, Medicaid, SCHIP and other health-related expenses. This includes subfunctions 551, 552, 554, 571, 921.
Interest on the debt: $384,408,000,000. This includes subfunctions 901, 902, 908, 909. The proportion of the military debt was computed by (a) assessing national defense spending as a proportion of total outlays minus net interest payments for each year from 1940 to 2011 (est), and (b) taking the average proportion over these years and applying it to the interest on the cumulative debt.
Government: $92,301,000,000. Commerce, law enforcement, overhead costs of federal government and undistributed offsetting receipts. This includes subfunctions 372, 373, 376, 751, 752, 753, 754, 801, 802, 803, 804, 805, 806, 808, 809, 922, 951, 953, 954, 959.
Income Security & Labor: $302,511,000,000. Job training, disability, retirement and unemployment insurance, Social Security. This includes subfunctions 504, 505, 601, 602, 603, 609, 651, 923.
Housing & Community: $137,552,000,000. Housing assistance and credit, community development and services supporting social needs. This includes subfunctions 371, 451, 452, 453, 506, 604, 925.
Food: $115,522,000,000. Agriculture and nutritional assistance. This includes subfunctions 351, 352, 605.
Veterans Benefits: $107,423,000,000. Health care, housing and income benefits for veterans. This includes subfunctions 701, 702, 703, 704, 705.
Environment, Energy, & Science: $85,268,000,000. Natural resources and environment, supply and use of energy and science and research activities. This includes subfunctions 251, 252, 271, 272, 274, 276, 301, 302, 303, 304, 306.
Education: $96,902,000,000. Elementary, secondary, higher and vocational education. This includes subfunctions 501, 502, 503.
International Affairs: $34,507,000,000. Diplomatic, development and humanitarian activities abroad. This includes subfunctions 151, 153, 154, 155.
Transportation: $61,734,000,000. Development and support of air, water, ground and other transportation. This includes subfunctions 401, 402, 403, 407.
Estimating Your Federal Taxes
Five filing statuses were used – single no children, single head of household one child, married filed jointly no children, married filed jointly one child and married filed jointly two children.
Incomes were calculated by taking the mean value of 2009 quintiles, the latest year for which data are available. The Census offers mean household income by quintile (i.e. the wealthiest 20% of households, the next wealthiest 20% of households, etc.) The most recent mean household income by quintile at the time of publication is variable B19081 in the Census Factfinder.
Taxes were estimated using the IRS withholding calculator for 2011. Since this is a withholding calculator that forecasts tax liabilities into the current year, it will not calculate tax credits, such as the Earned Income Tax Credit (EITC). For low income filers, it is possible that they will receive a refund, instead of zero taxes as calculated by the withholding calculator, due to the EITC. Taxes were calculated based on the following assumptions: all income was wage income and all filers used the standard deduction. Additionally, higher income earners will likely pay lower taxes due to the use of itemized deductions. To see the Internal Revenue Service's Witholding Calculator, click here.
Breakdown of Source of Receipts for Federal Outlays:
Page 2 of Where Do Your Tax Dollars Go? is based on the receipts used for Federal Funds outlays (expenditures), found in the Budget of the United States Government, Fiscal Year 2012, Public Budget Database.
The breakdown and categories of receipts for fiscal year 2010 are derived from the receipts found in Public Budget Database Fiscal Year 2012, Budget of the United States Government, Fiscal Year 2012, Analytical Perspectives Table 28.1 "Receipts, Outlays and Surplus or Deficit by Fund Group," and Budget and Table 15-5 "Revenues By Source."
The “borrowed” amounts of each dollar spent in 1943 and 2000 are derived from the differences between Federal Funds receipts and outlays found in the Budget of the United States Government, Fiscal Year 2012, Historical Table 1.4.
Receipts for Federal Fund expenditures for fiscal year 2010 were $1,246,575,000,000.
The “borrowed” 53.4 cents of each dollar spent in FY2010 is based on the Federal Funds deficit: the difference between Federal Funds outlays ($2,663,375,000,000) and Federal Funds receipts ($1,246,575,000,000) which equals $1,416,800,000,000.
Ratios of individual to corporate contributions to tax receipts is based on data found in Budget of the United States Government, Fiscal Year 2012, Historical Table 2.1.
Corporate profits and corporate income taxes are available from the U.S. Bureau of Economic Analysis's National Income and Product Account (NIPA), Table 1.12. through the 3rd quarter of 2010. We assume that the 4th quarter profits and taxes will be equal to the average profits and taxes over the first three quarters. Average corporate tax rates are simply calculated as “Taxes on corporate income” over “Corporate profits with IVA and CCAdj”.