Generally, Congress allocates over half of the discretionary budget towards national defense and the rest to fund the administration of other agencies and programs. These programs range from transportation, education, housing, and social service programs, as well as science and environmental organizations.
Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources. During FY2022, the federal government spent $6.3 trillion.
The Brookings Institute found that the average bachelor's degree holder contributes $278,000 more to local economies than the average high school graduate through direct spending over the course of their lifetime, and an associate degree holder contributes $81,000 more than a high school graduate.
Two-thirds of bachelor's degrees in the United States are awarded by public universities. College-educated workers enjoy a substantial earnings premium. On an annual basis, median earnings for bachelor's degree holders are $40,500 or 86 percent higher than those whose highest degree is a high school diploma.
The federal government spends nearly $79 billion annually on primary and secondary education programs. Much of the funding is discretionary, meaning it is set annually by Congress through the appropriations process.
The federal government funds a variety of programs and services that support the American public. The government also spends money on interest it has incurred on outstanding federal debt, including Treasury notes and bonds. In 2024 the federal government spent $6.75 trillion, with the majority spent on Social Security.
Overall, housing accounted for the largest share of total expenditures (32.9 percent), followed by transportation (17.0 percent), food (12.9 percent), personal insurance and pensions (12.4 percent), healthcare (8.0 percent), and entertainment (4.7 percent).
The top 10% of earners bore responsibility for 76% of all income taxes paid, and the top 25% paid 89% of all income taxes. Altogether, the top 50% of filers earned 90% of all income and were responsible for 98% of all income taxes paid in 2021.
Sources of Federal Revenue
So far in FY 2025, individual income taxes have accounted for 49% of total revenue while Social Security and Medicare taxes made up another 40%. Government revenue also comes from payments to federal agencies like the U.S. Department of the Interior. Have you visited a national park recently?
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; . . .
In 2021, the highest shares of local direct spending on public welfare were in New York (17 percent) and California (16 percent).
Nearly half of mandatory spending in 2022 was for Social Security and other income support programs such as the Child Tax Credit, food and nutrition assistance, and federal employee benefits (figure 3). Most of the remainder paid for the two major government health programs, Medicare and Medicaid.
The American Rescue Plan Act of 2021 temporarily expanded the child tax credit for the 2021 tax year to $3,600 per child younger than age 6 and $3,000 per child up to age 17.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
As Figure A suggests, Social Security is the single largest mandatory spending item, taking up 38% or nearly $1,050 billion of the $2,736 billion total. The next largest expenditures are Medicare and Income Security, with the remaining amount going to Medicaid, Veterans Benefits, and other programs.
In 2021, home equity and retire- ment accounts composed the majority (62.6 percent) of aggregate household wealth.
Most of the government's federal income tax revenue comes from the nation's top income earners. In 2021, the top 5% of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66% of the national total.
We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust funds, not a personal account with your name on it. Many people think of Social Security as just a retirement program.
The federal government spent nearly $1.5 trillion on health care in fiscal year 2022. In addition, income tax expenditures for health care totaled $300 billion. The federal government spent nearly $1.5 trillion on health care in fiscal year 2022 (table 1).
That's because American schools are well known for providing high-quality education through a balanced, tried-and-tested curriculum. The US education system is informed by cutting-edge research, which helps develop students into critical thinkers with well-rounded social-emotional skills.
State and local governments provide the vast majority of funding for K-12 education — 86 percent of all school funding. State governments rely on formulas that distribute education funds among school districts.
Teachers are paid by school districts which receive most (but not all) of their funds through local tax payers; supplemented sometimes by proceeds of various fundraising efforts.