As required by law, every Form 1040 instruction booklet includes a section that shows where the federal government gets and spends its money. As taxpayers, it is in your best interest to be aware of this information. Here is the data for the income and spending of the federal government for the fiscal year ending September 30, 2023, as reported by the IRS in the 2024 instruction booklet for Form 1040:

Observations

1. Annual deficit spending remains a consistent problem. No matter where you fall on the political spectrum, annual deficits cannot be sustained. Fortunately, the yearly deficit of $1.694 trillion is lower than the pandemic deficit of $3.129 trillion in FY 2020. Regardless, it must still be repaid. The most significant spending category continues to be social programs, which include Social Security, Medicare, and retirement benefits (62% of all outlays).
2. Government borrowing costs more. With interest rates rising over the past couple of years, several developments have occurred. First, those who save are now being rewarded for this financial behavior with higher interest rates on their savings. However, this interest rate increase is now costing borrowers more, and the government is one of the largest borrowers. Fully 11% of outflows pay interest on the debt. This represents an increase from 5% in 2020. That means an additional 6% of government spending is not available to address current needs, compared to just three years ago.
3. Solutions to money problems are the same for everyone. When you have a money problem, you either bring in more money, spend less, or do some combination of the two. The same is true for our federal government.

More to come

With recent tax changes, the impact on the deficit is sure to become more problematic, especially if interest rates remain high. None of this situation will improve until the will to reduce the debt is on everyone’s mind. And that is why it is a legal mandate for the IRS to publish this chart in the Form 1040 instructions so that all taxpayers receive an update on the situation at least once a year. As always, please don’t hesitate to contact our RRBB advisors if you have any questions.