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Where do all my tax dollars go?

A quick summary of how your tax dollars are used by the government.
Raghav
Raghav Rasal

July 17, 2020

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In 2019 alone, the US government spent $4.4 trillion, and of that amount over $3.5 trillion was through federal taxes. It is therefore undoubtedly clear how important and significant taxes are for the federal government. However, it is still important to understand exactly how your tax dollars are being spent by the government. 

In essence, you can break down the usage of your tax dollars into the following three categories:

  • Interest on government debt (~8%) - approximately 8 percent of the taxpayers’ dollars go toward paying off America's outstanding debt. The interest paid on top of the debt changes based on the debt amount and market interest rates. 
  • Mandatory/entitlement spending (~61%) - as suggested by the name, this portion of taxpayers’ dollars can be spent without being subjected to a budget review. This portion of the budget is also referred to as entitlement spending since the public is entitled to some of the services that the money is being spent on. These services include:
    • Medicare
    • Medicaid 
    • Veteran benefits
    • Social security
  • Discretionary spending (~31%) - this portion is spent on services that the Congress must actively review and debate upon. Services in this category include the following:
    • National defense 
    • Public transportation
    • Education 
    • Veteran benefits 
    • Health 

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