Where will your taxes go?

Opinion: April 15, 2011 at 12:00a.m.

By Brian Riedl

Heritage Foundation

Taxpayers frantically filing their 1040s — as well as anyone following the spending and deficit debate in Washington — may be asking where exactly their tax dollars are going.

Some believe most spending goes to welfare and foreign aid. Others believe defense and corporate welfare dominate the budget. In realty, Social Security and Medicare are the largest programs, and are set to nearly double over the next decade.

Overall, Washington will spend $32,137 per household in 2011 — the highest level in American history (adjusted for inflation). It will collect $18,295 per household in taxes. The remaining $13,841 represents this year’s staggering budget deficit per household, which, along with all prior government debt, will be dumped in the laps of our children.

Government spending has increased by $5,000 per household since 2008, and nearly $10,000 per household over the past decade. Yet there is no free lunch: If spending is not reined in, then eventually taxes must also rise by $10,000 per household.

Social Security/Medicare

Washington will spend this $32,137 per household as follows (all numbers adjusted for inflation): Social Security/Medicare: $10,458. The 15.3 percent payroll tax, split evenly between the employer and employee, covers most of Social Security’s and some of Medicare’s costs. This system can remain sustainable only if there are enough workers to support all retirees, which is why it risks collapsing under the weight of 77 million retiring baby boomers. Unless these programs are reformed, paying all promised benefits would eventually require doubling all income tax rates.

Defense: $6,465. The defense budget covers everything from military paychecks, to operations in Iraq and Afghanistan, to the research, development and acquisition of new technologies and equipment. Lawmakers drastically reduced defense spending following the collapse of communism in the early 1990s. The 9/11 attacks reversed this trend, and the $2,800 per household increase since 2000 has returned defense spending closer to its historical levels (but still lower than during previous wars).

Anti-poverty programs: $5,374. Nearly half of this spending subsidizes state Medicaid programs that provide health services to poor families. Other low-income spending includes: Temporary Assistance for Needy Families, food stamps, housing subsidies, child-care subsidies, Supplemental Security Income and low-income tax credits.

Interest on the federal debt: $1,739. The federal government is $14 trillion in debt. It owes $10 trillion to public bond owners, and the rest to other federal agencies (mostly to repay the Social Security trust fund, which lawmakers raided annually before the program fell into permanent deficit last year).

Veterans’ benefits: $1,190. The federal government provides income and health benefits to war veterans. Spending has leaped 147 percent over the past decade.

Unemployment benefits: $1,135. Unemployment costs have nearly tripled since the recession began.

Education: $698. Education spending is primarily a state and local function; 9 percent of the total comes from Washington. The federal education budget has jumped 83 percent since 2000. Most federal dollars are spent on low-income school districts, special education and college student financial aid.

Federal gas tax

Health research/regulation: $552. This spending is up 56 percent over the decade, and much of this growth is concentrated in the National Institute of Health. Highways/mass transit: $522. Most highway and mass-transit spending is financed by the 18.4 cent per-gallon federal gas tax. Washington subtracts an administrative cost and sends this money back to the states with numerous strings attached. Justice administration: $510. Justice spending includes federal attorneys and prisons, as well as law-enforcement grant programs. New homeland security costs have added $100 per household to justice spending.

The programs listed above cover $28,643 per household. The remaining $3,494 is allocated to all other federal programs, including international affairs, natural resources, the environment, regional development, farm subsidies, social services, space exploration, air transportation and energy.

Brian Riedl is the Grover M. Hermann fellow in federal budgetary affairs at The Heritage Foundation, Washington, D.C. Distributed by McClatchy-Tribune Information Services.