US federal tax money primarily funds mandatory spending programs, including Social Security, Medicare, and Medicaid, alongside national defense and interest on the national debt. The majority, over 60%, goes toward social safety nets and health entitlements, while the rest covers military operations, infrastructure, education, and federal employee salaries.
Your tax dollars are used to fund a variety of governmental programs, including public assistance, healthcare, and Social Security programs. A large portion of tax revenue also goes toward the defense budget. Learn more about what the federal government does with your tax dollars.
So far in fiscal year 2026, the largest source of federal revenue is Individual Income Taxes (49.5% of total revenue). Federal revenue is used to fund a variety of goods, programs, and services to support the American public and pay interest on government debt. Revenue is typically measured by fiscal year (FY).
This can be accounted for in the fact that taxpayers in red states enjoy lower state tax burdens (Texas and Florida the lowest) than blue states, on average, thus necessitating more federal funds to operate. California and New Jersey are the least federally dependent states.
Taxpayers fund the Supplemental Nutrition Assistance Program (SNAP), or food stamps, through federal taxes, with total annual spending around $100 billion (FY 2024), meaning the average taxpayer contributes roughly $30-$40 annually, a small fraction of total federal spending, with most funds going directly to benefits for low-income families, stimulating local economies, and a portion returning to farms.
A range plot showing the balance of funds exchanged between states' residents and the federal government in FY 2024. Virginia has the largest positive difference (received the most) and California has the largest negative (paid the most).
Discussions of the federal budget often refer to man- datory spending — on Social Security, Medicare, and similar programs — as ''uncontrollable.
President Abraham Lincoln started the first U.S. income tax in 1861 to fund the Civil War, but it was temporary; the modern, permanent income tax system was established under President Woodrow Wilson with the ratification of the 16th Amendment in 1913, which gave Congress the power to levy income taxes without apportionment.
The next largest share of state spending – 29 cents out of every dollar – supports a range of health and human services that assist low-income children, families, seniors, and people with disabilities.
High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2022, the bottom half of taxpayers earned 11.5 percent of total AGI and paid 3 percent of all federal individual income taxes. The top 1 percent earned 22.4 percent of total AGI and paid 40.4 percent of all federal income taxes.
Around 40% of U.S. households paid $0 in federal income tax in 2025, largely due to the new "One Big Beautiful Bill" (OBBB) signed in mid-2025, which provided significant deductions for seniors, families with children, and tip earners, alongside tax cuts from expiring TCJA provisions. This legislation, also called the Working Families Tax Cut, expanded credits like the Child Tax Credit and added deductions, like an extra standard deduction for seniors, reducing tax burdens for many low-to-middle-income earners, though high-income earners saw less benefit.
The best states for taxes are often those with no state income tax, like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. However, the "best" state depends on your personal situation, as some states compensate with higher sales or property taxes, so you must consider the overall tax burden, including income, property, and sales taxes, for a complete picture.
Nine U.S. states levy no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Yes, with a $2,000 monthly income, you might qualify for food stamps (SNAP), especially as a single person or in a small household, as it often falls below the 130% federal poverty line for gross income, but eligibility depends on your household size, state rules, and deductions for things like rent or childcare; you should apply at your state's SNAP agency to know for sure.
While specific rankings fluctuate, states with high poverty rates and broad eligibility, particularly in the South and West, often have the most SNAP recipients, with New Mexico frequently topping the list for the percentage of residents receiving benefits (around 21%), while large states like California, Texas, Florida, and New York serve the most people in total numbers due to population size, though official total figures require checking USDA data.
Alaska, Rhode Island, and New Mexico were the states with the highest rates of federal funding per person.
In-Depth Look at the Most Federally Dependent States