How Uncle Sam Spends Your Tax Money

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In federal budgets, just as with credit cards, spending begets more spending.

With Interest

To service the $9 trillion-and-growing national debt, the U.S. government spent $406 billion on interest in 2006, up 13% since 2001. All told, about 15 cents of each tax dollar is spent on interest payments.

"The biggest thing people don't recognize is how much we're spending on interest servicing our national debt," says Ellis of Taxpayers for Common Sense. "If we're taking in under $3 trillion in tax revenues, it's a pity to spend $400 billion in interest for goods and services we used a year ago. We're living beyond our means, and we just keep adding to the tab."

(The Treasury Dept. measures the annual interest at $406 billion, but the White House reports "net interest" at $220 billion because it subtracts the amount of interest that the federal government pays for borrowing money from Social Security and other programs.)

After accounting for military, health care spending, and interest on debt, the rest of the discretionary tax dollar goes to areas such as disability insurance and other benefit programs, education, nutrition programs, public housing, and agencies such as the Agriculture Dept. and the Energy Dept.

Disgruntled Taxpayers—and Resistors

Is there anything you can do if you're unhappy with how Uncle Sam is spending your tax money? A small minority of Americans simply refuse to pay. These tax rebels range from radical libertarian groups who don't believe in federal government to anti-war activists who do not want to support war efforts.

"With Congress passing more money for Iraq, we're seeing a lot more anger and a lot of people looking for ways to protest," says Ruth Benn, a spokeswoman for the National War Tax Resistance Coordinating Committee, a national network. Benn estimates that 10,000 individuals in her network refuse to pay income tax.

It's a risky strategy, to be sure: The Internal Revenue Service will assess penalties, go to court to seize assets, and even toss people in jail for not paying their tax bills. There's a less controversial—and less dangerous—means of influencing how tax receipts are spent, of course. It's at the ballot box.

Click here for a slide show to see where U.S. tax dollars are spent.

Herbst is a reporter for BusinessWeek.com in New York.