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Where Does Your Tax Money Go?

Each year, you earn money and pay a whopping fraction to the federal government. For most families, the annual payment is a five-digit number. Usually when you spend that much, you know exactly where it all went. That’s the kind of payment you only make once in a while, on a new car or a house. So, where does the money you paid to the IRS go?

The Federal Budget

The annual federal budget determines how all government revenue will be spent in that year. First, federal agencies submit their budgets to the president for review. The president then submits an overall proposal to Congress. Congress reviews the proposal and makes some changes. Then, the budget with changes is returned to the president who signs it into law. As most of the federal government’s revenue comes from the individual income tax, you can use the budget as a good way to determine how much of your money went where.

The Big Ones

The three broad categories that compose most of the government’s spending are social security, health care, and defense. For 2017, these are estimated to respectively make up 36 percent, 28 percent, and 15 percent of spending. [k1] Interest payments on government debt and veterans’ benefits follow at 7 percent and 4 percent.

Get Into the Details

The paragraph above is pretty typical of the answer you’ll get if you search for “where does my tax money go?” However, you might not find it exactly satisfactory. The terms “health care” and “defense” aren’t particularly specific. Fortunately, if you want to dig down into the nitty-gritty, you’re in luck. The Federal Funding Accountability and Transparency Act of 2006 and the Government Funding and Transparency Act of 2008 require the federal government to furnish searchable information on entities that receive money from the federal government.

The result is usaspending.gov, where there you can find all sorts of ways of exploring federal spending. You can start your search by checking out which states receive the most funding, or you can sort by federal agency. From there, you can see which bureaus are spending where. You can also check out spending by type: contract, grant or other financial assistance. The site even has an API if you want to build a program to automate a particular type of analysis!

You can’t find details about particular contracts or grants on the website because the individual agreements may contain confidential or proprietary information. However, it definitely gives you a great springboard to do further research. For example, once you’ve found a particular contract of interest, you can google the company and look for more details in the news. If you can determine the size of a particular contract, you can then divide that number back into the overall federal budget for a good estimate of what percentage of your tax payment went into it.

After all the research you’re bound to do on various government spending, it might sting a little less when you sign the check for your next tax bill. At least you’ll know where it’s going!