Breakdown of the Individual Income Tax Dollar: Your income taxes go towards the
Federal funds budget, so this is the budget that has been broken down for the chart on page 1 of
Where Do Your Tax Dollars Go? The total federal government budget includes the Federal funds
and the trust funds budgets. Trust funds include Social Security, Railroad Retirement, and
others. All numbers are derived from the tables of individual federal agency budgets as provided
in the Office of Management and Budget (OMB), Budget of the U.S. Government, FY2006,
Appendix, available at www.whitehouse.gov/omb/budget/fy2006/. The breakdown is for outlays
(as opposed to budget authority) in fiscal year 2004, since this most closely corresponds to your
tax filing. Total Federal funds outlays in 2004 were $1,705,657 million. We have defined the
categories on the bar chart as follows:
Military and Defense ($511.2 billion) includes the function area (referring to government
categories) of national defense, plus the Department of Homeland Security, and most of
international military assistance. Not all homeland security spending is included. A portion
of homeland security spending cannot be identified in the tax dollar analysis as separate from
other types of spending because of limitations in the data released by the OMB in the budget
materials. Other homeland security spending would appear elsewhere in the budget, but
would mainly fall into transportation (in other category on the chart). Adding in this amount
would only marginally impact the percentages, and since we round off the numbers, the
overall chart would not be changed. See below for more information.
Health ($345.8 billion) is the Federal funds portion of all health spending by the federal
government, including the Federal funds spending on Medicare.
Interest on the Debt ($317.3 billion) refers to the interest payments paid on the national
debt. The military share of the interest payment is based on the average historical share of
national defense spending. Since interest payments are on the debt which has been
accumulated over time, the allocation of shares between military and non-military spending
takes this into account.
Income Security ($112.3 billion) includes Federal funds outlays on the function area
income security with the exception of housing assistance, and food and nutrition assistance,
which are separately illustrated on the graph. This category includes Supplemental Security
Income ($36.4 billion) which provides cash assistance to disabled, elderly and blind who have
very low incomes; payments where Earned Income Tax Credit exceeds tax liability ($33.1
billion); Temporary Assistance for Needy Families ($17.7 billion); payments where child credit
exceeds tax liability ($8.9 billion); foster care and adoption assistance ($6.3 billion); child care
spending and a variety of other small programs for children and families.
Education ($62.6 billion) includes all Federal funds outlays on elementary, secondary, and
vocational education, higher education, and research and general education aids, subfunctions
defined by the government.
Veterans’ Benefits and Services ($58.6 billion) includes the Federal funds portion of the
Department of Veterans’ Affairs and any other Federal funds spending on the function area
veterans’ benefits and services.
Nutrition ($45.9 billion) includes any Federal funds outlays classified as food and
nutrition assistance, including the Food Stamp program, all child nutrition programs (such as
the National School Lunch Program) and others.
Housing ($36.6 billion) includes all Federal funds outlays defined by the federal
government as housing assistance.
Natural Resources and the Environment ($29.4 billion) includes all spending on the
government-defined function area natural resources and the environment.
Job Training ($6.7 billion) includes the total for training and employment services as
defined by the government.
Other ($179.3 billion) includes everything else not list above and is comprised of the
following function and subfunction areas: international affairs aside from most of
international security assistance (included above in military); general science, space and
technology; energy; agriculture; commerce and housing credit; transportation; community and
regional development; labor and social services outside of training and employment services;
justice; general government; and undistributed offsetting receipts.
Average Household Income Taxes: The average household income taxes were computed first
by forecasting 2004 income levels by state, city, town and county based on data from the 1990
and 2000 Censuses. Then, the tax estimate was computed by assuming standard deductions and
exemptions for a married couple with one dependent. No other deductions or credits were
assumed. This methodology provided the best estimates consistent with available IRS data on
income taxes paid by taxfilers. Additional data and statistics on income and taxes are available
at: NPP Database – www.nationalpriorities.org/database; Census Bureau – www.census.gov;
Internal Revenue Service – www.irs.gov.
Distribution of Security Dollars: Military ($484.3 billion) is as above without the
Department of Homeland Security. Homeland Security ($29.3 billion) is based on the OMB,
Budget of the U.S. Government, FY2005, Mid-Session Review and the Public Database, FY2006.
There appears to be $29 billion in discretionary outlays classified as homeland security, plus
$434 million in mandatory outlays minus $163 million in trust funds in the DHS budget.
Preventive measures ($16.9 billion) refer to all non-military forms of international assistance.
Mortgage interest tax deduction: See Joint Committee on Taxation, ‘Correction Of Error In
Table 3 Of JCS-1-05, Estimates Of Federal Tax Expenditures For Fiscal Years 2005-2009,’ March
17, 2005 at http://www.house.gov/jct/x-13-05.pdf.
Veterans’ benefits: See Veterans’ organizations alternative budget at
www.pva.org/independentbudget/ .
