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The Real Return on Your Taxes

This Tax Day, our federal government is going to be busy figuring out how to spend the roughly $3 trillion it collected in combined income and payroll taxes. Every year, lawmakers and officials allocate $4.2 trillion in spending money, much of which comes from the taxes collected from individuals and businesses.

Photo of Keith Mestrich

President & CEO

When we think about where our tax dollars go, we typically think of bridges, roads, tunnels, and other public infrastructure. But our income taxes have an incredibly broad reach, and wind up funding just about every aspect of the federal government – even programs you might not realize you’re helping to keep alive as you chip in a little bit out of each paycheck. As the leadership in Washington continues to signal major tax reform on the horizon, it’s important for Americans to understand exactly where their money is going.

  • More than a quarter of our income taxes, nearly 29 percent, goes to funding health and social wellness programs, according to the National Priorities Project. That’s helping to pay for Social Security, along with federal programs like Medicaid and Medicare. Social Security offers every American a safety net, promising to help support them in retirement the same way they’ve helped support workers who came before.
  • Funding for Medicaid and Medicare offers millions of Americans access to much-needed health services, including pediatric care for their children, affordable prescription medication and preventive care that keeps people healthy and keeps our nationwide medical costs down by avoiding trips to emergency rooms for preventable illnesses.
  • Another 25.4 percent goes to funding our military, and 13.7 percent helps to pay down interest on our national debt. The final third of the average household’s $13,000 in annual income taxes is spread out over thousands of other segments of the government.
  • Some of our tax money is spent on agencies like the Food and Drug Administration, and similar consumer protection efforts. This money directly protects us from harmful additives and dangerous chemicals, ensuring the products we buy in stores do what they promise to do, and won’t cause any troubling side effects. It ensures companies are honest and open with their customers, and helps enforce regulations concerning transparency and accountability on behalf of corporations.
  • About 1.9 percent of our taxes, the NPP estimates, pays for housing and community programs. These programs help America’s neediest families find reliable, long-term shelter, and put community members in the best possible position to pursue a better life. Affordable housing and housing assistance programs subsidize the cost of long-term housing for recipients, and offer an opportunity to gain a stronger economic footing.
  • Still more funding goes to even less often cited areas of federal policy and spending. About 1.6 percent is used to fund energy and environmental programs, helping develop new, clean energy resources and protect our municipal water and air supplies from dangerous contamination. A 4.6 percent portion of tax receipts is used to fund farming and agricultural support programs, which subsidize farmers’ operations and make sure food makes it from farms to kitchen tables around the country, at affordable and sustainable prices.

Our tax dollars go far beyond building bridges and repairing highways. Much of our money is used to help those who need it the absolute most. Whether it’s offering access to healthcare, or making sure working families have affordable roofs over their heads, tax revenue is used to make sure our neighbors are not left wanting for basic necessities.

These social protection programs keep our water drinkable; keep our air breathable; ensure veterans are cared for when they complete their service; protect consumers from dishonest corporate actors; help working families keep their heads above water when faced with unemployment; keep produce prices low and farmers in business; and keep families across the country healthy.

This year, as you’re slogging through the chore of filing your tax return and eagerly awaiting your refund check from the federal government, take a moment to pause and recognize the incredible network of agencies, programs and policies our collective taxes help to support. It’s only by paying our fair share into the system that we can all reap the incredible benefits.