Policy Basics: Where Do Our Federal Tax Dollars Go?

The federal government collects taxes in order to finance various public services. As policymakers and citizens weigh key decisions about revenues and expenditures, it is instructive to examine what the government does with the money it collects.

In fiscal year 2011, the federal government spent $3.6 trillion, amounting to 24 percent of the nation’s Gross Domestic Product (GDP). While the level of 2011 expenditures - as a share of GDP - remains high due to the economic downturn, the composition of the budget largely resembles the patterns of recent years. Of that $3.6 trillion, $2.3 trillion was financed by federal tax revenues. The remaining $1.3 trillion was financed by borrowing; this deficit will ultimately be paid for by future taxpayers.