What Are Your Taxes Really Paying For?

Nobody likes paying taxes, but most of us accept it as a necessary means to an end. Without our tax dollars, the government would be crippled -- we'd lose access to trillions of dollars of federal programs and operations.

That doesn't mean the government spends its money perfectly. In fact, any detailed reading of the federal budget is likely to uncover elements you don't like, no matter what your political persuasion. But does the good truly outweigh the bad? Are our tax dollars spent wisely enough? Let's dig into the details to see where your payments to the IRS are really going.

Obama's Budget for 2013Create infographics

This is the full proposed budget for the government's 2013 fiscal year. The White House submitted it early last year, and it may or may not be perfectly followed for the 2013 fiscal year, but it's likely to be a fairly accurate guide to where your money goes, category by category.

Some of your federal taxes will be taken out as payroll taxes, which go to pay for Social Security and Medicare. The amount you pay toward these programs will vary based on your income level, but for the purposes of simplicity we'll assume that "you" in this case barely make it into the top 25% of taxpayers, which requires a gross income of about $86,000. According to my calculations (you can see them in the preceding link), you'd pay roughly $7,500 in income taxes, net of all credits and adjustments, and roughly $6,000 in payroll taxes for social-insurance programs.

Whats Left After Taxes?Create infographics

This isn't a perfect guide, of course. Higher earners will pay more, and low earners will pay less. But here's the breakdown for this particular taxpayer: Every $100 in adjusted income will result in a payment of about $15.68 in taxes. About $6.98 goes toward mandatory social insurance programs -- Social Security and Medicare -- and another $8.70 goes toward everything else. The social-insurance programs are a separate part of the federal budget, and although there are various proposals in the works to change how much they take in, there's not much we can do about it for now. But how are your tax dollars doled out for everything else? Let's assume that the federal budget distributes tax dollars in an amount equal to its expense breakdown for everything outside of Social Security and Medicare/Medicaid, and take a look at where each $100 of your taxes goes:

What $100 in Taxes Pays ForCreate infographics

Before we get to discretionary spending, let's look at these "other" mandatory-spending categories. Most of them are income security programs of various sorts, and much of the rest is made up of retirement benefits for government employees and former military personnel:

The Other Mandatory CostsInfographics

Discretionary spending makes up the bulk of the rest. Defense is a huge chunk of that discretionary spending, as you've already seen, but where does the rest go?

Divvying Up Discretionary CostsCreate infographics

It can be tough to really assess where everything goes if you break it down piece by piece, so let's close this out with a look at all the places your money goes, all on the same graph:

$100 in Income Taxes Pays For ...Infographics

That's a lot of different programs. Do you see any areas where the government's spending too much? How about places where it should spend more? No budget can satisfy all citizens, but there are sure to be areas where our elected leaders could tweak things for the better. Feel free to share your thoughts in the comments section on our complex and imperfect (but hopefully improving) government spending priorities.

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The article What Are Your Taxes Really Paying For? originally appeared on Fool.com.

Fool contributor Alex Planes has no financial stake in anything mentioned here, but he could probably point out a few areas of improvement for federal spending. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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