Breakdown of the Individual Income Tax Dollar:

The total federal government budget is made up of both federal funds and trust funds. Trust funds include most of Social Security, Unemployment Compensation, and Railroad Retirement, as well as other smaller trust funds. All other funds are federal funds, and income taxes are allocated to the federal funds part of the budget. The chart found on Page 1 of Where Do Your Tax Dollars Go? is based on the functions and subfunctions (government categories of how the funds are used) within the federal funds portion of each government agency budget found in the Budget of the United States Government, Fiscal Year 2009, Analytical Perspectives and Public Budget Database Fiscal Year 2009.

The breakdown of federal funds is based on estimated outlays (as opposed to budget authority) for fiscal year 2008 since this most closely corresponds to your tax filing in 2009 for income earned in calendar year 2008. Estimated total federal fund outlays for fiscal year 2008 were $2,250,064,000,000.

We have defined the categories in the bar chart as follows:

Military: $662,334,000,000. National defense and security, nuclear weapons activities, and international security assistance. This includes subfunctions 051, 053, 054, 152.

Health: $479,326,000,000. Medicare, Medicaid, SCHIP and other health-related expenses. This includes subfunctions 551, 552, 554, 571.

Interest on the debt: $445,095,000,000. Military and non-military interest on cumulative debt. This includes subfunctions 901, 902, 908, 909. The proportion of the military debt was computed by (a) assessing national defense spending as a proportion of outlays less net interest for each year from 1940 to 2008 (est), and (b) taking the average proportion over these years and applying it to the interest on the cumulative debt.

Income Security & Labor: $161,890,000,000. Job training, disability, retirement, and unemployment insurance, social security. This includes subfunctions 504, 505, 601, 602, 603, 609, 651.

Housing & Community: $86,073,000,000. Housing assistance and credit, community development, and services supporting social needs. This includes subfunctions 371, 451, 452, 453, 506, 604.

Veterans' Benefits: $85,733,000,000. Health care, housing, and income benefits for veterans. This includes subfunctions 701, 702, 703, 704, 705.

Food: $80,278,000,000. Agriculture and nutritional assistance. This includes subfunctions 351, 352, 605.

Government: $69,464,000,000. Commerce, law enforcement, overhead costs of federal government, and undistributed offsetting receipts. This includes subfunctions 372, 373, 376, 751, 752, 753, 754, 801, 802, 803, 804, 805, 806, 808, 809, 923, 925, 951, 953, 954, 959.

Education: $67,465,000,000. Elementary, secondary, higher and vocational education. This includes subfunctions 501, 502, 503.

Environment, Energy, & Science: $63,931,000,000. Natural resources and environment, supply and use of energy, and science and research activities. This includes subfunctions 251, 252, 271, 272, 274, 276, 301, 302, 303, 304, 306.

International Affairs: $26,066,000,000. Diplomatic, development, and humanitarian activities abroad. This includes subfunctions 151, 153, 154, 155.

Transportation: $22,409,000,000. Development and support of air, water, ground, and other transportation. This includes subfunctions 401, 402, 403, 407.

Median Income Family Taxes: State-level median family income (MFI) data were obtained from the American Community Survey (ACS). Using these data from 2003-2007, income levels for 2008 were forecasted. For cities and towns, the most up-to-date median family income data available were obtained from ACS, and a ratio was computed between the city MFI and its state MFI. This ratio was then applied to the forecasted 2008 state income levels to arrive at a city income level.

To all of these forecasted and estimated MFIs, a taxable income estimate was computed by assuming standard deductions and exemptions for a married couple with one dependent, including one child credit. No other deductions were assumed. Taxes paid were then computed by using Schedule Y-1 of the 2008 Tax Rate Schedules.

These predicted state and city level taxes were then apportioned to the federal budget categories listed above using the proportions determined as described.