What Does Federal Tax Pay For? Social Security, Defense, and Medicare

Federal taxes pay for a short list of very large obligations and a long list of smaller ones. In fiscal year 2024, the federal government spent roughly $6.8 trillion, and more than two-thirds of it went to just four things: Social Security, health programs (Medicare and Medicaid), national defense, and interest on the national debt.¹ Everything else people associate with the federal government — veterans’ care, food assistance, schools, highways, scientific research, courts, parks, disaster relief — shares what’s left.

The Big Picture

Here is roughly how each dollar of federal spending was allocated in FY 2024:¹

Social Security: $1.5 trillion (about 22%)
Medicare: $865 billion (about 13%)
Net interest on the debt: $881 billion (about 13%)
Defense: $850 billion (about 13%)
Medicaid: $618 billion (about 9%)
Income security programs: $370 billion (about 5%)
Other mandatory spending: $752 billion (about 11%)
All other nondefense discretionary: $960 billion (about 14%)

One split matters for understanding this list. Mandatory spending is money that flows automatically because existing laws entitle people to it: Social Security checks, Medicare claims, veterans’ disability compensation. Discretionary spending is what Congress actively appropriates each year, including defense and most of the agency budgets. Mandatory programs plus interest consume nearly two-thirds of the budget, so most of your tax dollars are already committed before Congress debates a single appropriations bill.²

Social Security

Social Security is the single largest federal expense. It cost about $1.5 trillion in FY 2024 and pays monthly benefits to retired workers, surviving family members, and people with qualifying disabilities.¹ As of December 2025, about 70.5 million people were receiving payments.³

The program is funded by a dedicated payroll tax split between employees and employers, and benefits are calculated from a worker’s career earnings and the age at which they start claiming. Because it’s mandatory spending, its cost rises with the size of the eligible population regardless of what Congress does in any given year.

Medicare and Medicaid

Federal spending on Medicare and Medicaid combined reached about $1.67 trillion in FY 2025, which makes health care the most expensive category in the budget when the two programs are counted together.⁴

Medicare covers people 65 and older, younger people who have received disability benefits for at least 24 months, and people with end-stage kidney disease.⁵ Part A pays for hospital stays, skilled nursing, and hospice. Part B pays for doctor visits, outpatient procedures, and preventive care. Part D, added in 2003, helps with prescription drug costs. Medicare alone cost about $865 billion in FY 2024.¹

Medicaid serves a different population: low-income individuals and families, pregnant women, children, and people with certain disabilities. It’s a federal-state partnership, with the federal government covering a substantial share of each state’s costs. The federal portion was about $618 billion in FY 2024 and roughly $671 billion in FY 2025.⁴ States spend billions more on their own share.

National Defense

Congress appropriated roughly $825 billion for defense in FY 2024.⁶ The money pays for salaries of active-duty personnel, weapons procurement, research and development, military construction, overseas operations, military housing, service-member healthcare, and next-generation technology.

Defense is discretionary, so Congress votes on the total each year. That makes it politically visible in a way mandatory programs are not. The scale of what the Pentagon maintains — aircraft carrier groups, intelligence networks, bases in dozens of countries — creates a practical floor beneath which spending rarely drops.

Interest on the National Debt

This is the line that surprises most taxpayers. Net interest on the debt was $881 billion in FY 2024 and grew to $1.2 trillion in FY 2025.¹⁷ The federal government now spends more on interest than on defense.

The national debt reached $37.64 trillion at the end of FY 2025.⁸ When federal spending exceeds revenue, the Treasury borrows the difference by issuing securities, and the government has to pay interest to whoever buys them.⁹ Unlike Social Security payments or defense contracts, interest doesn’t build anything or deliver a service. It’s the cost of past borrowing, and as interest rates rose in recent years, this category ballooned.

Veterans’ Benefits

The federal government spent about $369 billion on veterans’ programs in FY 2025, roughly 4 percent of obligations.¹⁰ The Department of Veterans Affairs runs the system under Title 38 of the U.S. Code, which covers medical care, disability compensation, vocational rehabilitation, and pensions.¹¹

A large share funds the VA’s own hospitals and clinics. The GI Bill covers tuition and living expenses for veterans in school. VA home loan guarantees let veterans buy homes with no down payment. Disability compensation pays monthly benefits to veterans with service-connected injuries or illnesses. These are legal obligations, not year-to-year choices.

Food Assistance, Tax Credits, and Other Safety-Net Programs

Programs aimed at preventing poverty consume roughly 7 percent of federal obligations. The Supplemental Nutrition Assistance Program (SNAP) provides food-purchasing benefits to about 42 million people in an average month, with total federal spending near $100 billion in FY 2024.¹² Other income-security programs include Temporary Assistance for Needy Families, Supplemental Security Income for aged and disabled people with limited resources, and housing assistance.

The Earned Income Tax Credit works through the tax code instead of a direct payment. Low- and moderate-income workers who file a return can claim a refundable credit that often exceeds their tax liability, resulting in a cash refund. For the 2025 tax year, the maximum credit ranges from $649 for a worker with no children to $8,046 for a family with three or more qualifying children, with income limits reaching $68,675 for married couples filing jointly.¹³ It’s one of the largest anti-poverty tools the federal government has, though most people don’t think of their tax refund as a government benefit.

Education

Federal education spending is a small share of the total, but it still runs into tens of billions of dollars. It flows in two directions.

For K-12, the largest federal program is Title I, which sends money to school districts serving high concentrations of low-income students. Schools where at least 40 percent of students come from low-income households can use Title I funds for schoolwide improvement.¹⁴ Federal money supplements state and local funding rather than replacing it; most K-12 dollars still come from state and local taxes.

For college, the biggest federal tool is the Pell Grant, need-based aid for undergraduates who haven’t yet earned a bachelor’s degree. The maximum award for the 2026–27 academic year is $7,395, and it doesn’t have to be repaid.¹⁵ Federal money also funds student loans, work-study, and grants for specific groups such as veterans and future teachers.

Roads, Research, and Everyday Government

The rest of nondefense discretionary spending pays for the everyday machinery of the federal government. Tax dollars maintain the interstate highway system, fund air traffic control, and support public transit. The Federal Highway Trust Fund, financed largely by fuel excise taxes, pays for road and bridge work.

Scientific research takes a significant slice. The National Institutes of Health funds medical research across nearly every disease category. NASA runs space exploration and climate science. The National Science Foundation supports basic research in physics, biology, engineering, and social sciences.

Environmental Protection Agency staff enforce clean air and water standards and oversee hazardous waste cleanup. The federal courts, the FBI, and the Bureau of Prisons all run on tax dollars. So do the National Weather Service, FEMA disaster relief, the National Park Service, and the diplomatic operations of the State Department. None of these individually claims a huge share, but together they form the infrastructure that keeps federal services running.

Why the Same Categories Keep Growing

The pattern behind the numbers is worth naming. Mandatory programs and interest payments dominate the budget and are growing faster than everything else. Social Security and Medicare rise as the population ages. Interest rises as the debt grows. That leaves a shrinking share for the discretionary items Congress actually votes on each year — defense, education, infrastructure, research, and the everyday agencies most people picture when they think about what their taxes pay for.

1
Congressional Budget Office. The Federal Budget in Fiscal Year 2024: An Infographic
2
U.S. Treasury Fiscal Data. Federal Spending
3
Social Security Administration. December 31 2025 Fact Sheet on Social Security
4
Centers for Medicare & Medicaid Services. FY 2025 CMS Financial Report
5
Office of the Law Revision Counsel. 42 USC 1395c – Description of Program
6
USAspending.gov. Government Spending Explorer – Budget Function
7
Government Accountability Office. Financial Audit: Bureau of the Fiscal Service’s FY 2025 and FY 2024 Schedules of Federal Debt
8
U.S. Treasury Fiscal Data. Understanding the National Debt
9
Office of the Law Revision Counsel. 31 USC 3101 – Public Debt Limit
10
U.S. Department of Veterans Affairs. FY 2025 VA Budget in Brief
11
Office of the Law Revision Counsel. Title 38 – Veterans’ Benefits
12
Food and Nutrition Service. Supplemental Nutrition Assistance Program (SNAP)
13
Internal Revenue Service. Earned Income and Earned Income Tax Credit (EITC) Tables
14
U.S. Department of Education. Title I, Part A – Improving Basic Programs Operated by Local Educational Agencies
15
Federal Student Aid. Federal Pell Grants