1. Taxes and Federal Revenue

2. A. Government’s Budget 1. Federal Budget = National Budget a) revenue - money taken in b) expenses - money spent 2. Goal is to have a balanced budget a) when revenue = expenses b) Deficit = spends more than brings in c) Surplus = money left over after all expenses are paid (Fiscal policy = how the government makes policy about taxation and spending)

3. B. Sources of Government Revenue 1. Income tax = established by 16 th amendment which takes a percentage of a person’s income (largest source of federal income) a) Progressive tax = more you make, more you pay b) Regressive tax = less you make, more you pay c) Proportional tax = all incomes pay the same d) Income tax is determined by annual tax return 2. Excise tax = charge on the making and consuming of particular goods and services a) Examples: sales tax, gasoline, telephone, “sin” taxes (tobacco, alcohol, cigarettes, legal betting)

4. B. Sources of Government Revenue (Cont) 3. Estate tax = paid through the transfer of property through inheritance, the more it is worth the higher the tax 4. Tariffs = paid on imports (coming into) 5. Fines = Penalties such as polluting, parking in a handicap parking place w/o being handicap 6. Government bonds = allows the government to borrow money 7. Social Security = payroll deduction to support retired or disables workforce (2 nd largest source of federal income)

5. C. Federal Expenditures 1. Social Security - largest spending category 2. Medicare - healthcare for old people 3. Income Security- retirement benefits for govt. employees, disabled coal miners, child nutrition 4. Health- Medicaid (healthcare for low incomes), research to finding cures for diseases 5. National Defense - 2 nd largest spending category = war 6. Debt - money for borrowed money 7. Education 8. Highways 9. Natural resources

6. D. The Budget and How it works 1. Each year the government adopts a budget a) Not a calendar year but a Fiscal Year (12 month year that does not match a calendar year) b) Presented on first Monday in February to Congress c) Congress creates a Budget Resolution (total of revenues and spending for the year and a target for spending) d) Spending broken into two categories: Mandatory (doesn’t need approval) Spending, Discretionary Spending (needs approval)

7. Budget Cont. 2. 13 Appropriation bills ( laws that approves spending for an activity) are created a) Must be finalized by September 15 (pass in both houses)

8. Taxation and Revenue Sources at the State and Local Level

9. A. Revenue Coming In 1. Personal Income Tax- It is progressive & are usually taken from your paycheck. Is a majority (50%) of the state’s revenue. 2. Corporate Income Tax- A 6.9% tax on the profits of businesses. Is 5.5% of the states revenue. 3. NC Sales Tax- A 4.5% tax on the sale of most goods and services. Second largest revenue source (28%) for the state. A 2.5% tax on the sale of the some goods and services for the county (12% of revenue). Food is exempt from state sales tax, but not the local tax.

10. A. Revenue Coming in (Cont) 4. Excise Tax- Charged on the production of tobacco, beer, wine, liquor, gas (state) 5. Estate Tax- Tax on the estate of someone who has died. (state) 6. Inheritance Tax- Tax on property when inherited. (state) 7. Property Tax- Tax on all property. Highest revenue for county (38%). All taxed at same rate; non-profit, govt, churches not taxed; “homestead exemption” lower tax on low-income and elderly. NC has the lowest prop tax (county)

11. B. Non-tax Sources of Revenue 1. Fines 2. Licenses- ex. Hunting, fishing, marriage, owning a restaurant 3. Permit- construction, building, 4. Fees: User (use of a public service), disposal (leaving trash at public dumps), impact (imposed on owners of new properties)

12. C. Where does the state revenue go? 1. Education- 56% (Comm. Colleges, univ, public ed) 2. Health and Human Services- 24% 3. Justice and Public Safety- 10% 4. General Government- 2.2% (General Assembly, Governor, Auditor, Lt. Gov, Administration) 5. Natural and Economic Resources- 2.2% (Ag, Commerce, Environment & Nat. Resources, Labor) 6. Transportation-.08% (grants to airports & aviation)

13. D. Where does the county revenue go? 1. Education- 29% (pub. ed K-12) (comm. college) 2. Human Services- 28% (Medicaid, foster care, hospital, social services, public/mental health, housing, child suppt) 3. Public Safety- 13% (Sheriff, EMS, Fire) 4. Other- 13% (Parks, solid waste, libraries) 5. Debt- 9% (Bonds- General Obligation Bonds (GOB) = tax is usually raised to pay these & are from referendums like schools) (Revenue Bonds= paid by a specific project like a toll road) 6. General- 8% (Register of Deeds, elections, legal services)