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Fiscal Policy Taxes, Government Spending, and Borrowing.

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Presentation on theme: "Fiscal Policy Taxes, Government Spending, and Borrowing."— Presentation transcript:

1 Fiscal Policy Taxes, Government Spending, and Borrowing

2 Fiscal Policy Definition: Use of government spending and revenue collection to influence economy Goals: –Promote economic growth and stability –Social policy programs with economic effects Social Security TANF (temporary assistance to needy families) Food stamps Medicare Medicaid

3 Types of Taxes x Yea:x Yea: Filing Status: Filing Status: Tax BracketSingleMarried Filing Jointly 10% Bracket$0 – $8,375$0 – $16,750 15% Bracket$8,375 – $34,000$16,750 – $68,000 25% Bracket$34,000 – $82,400$68,000 – $137,300 28% Bracket$82,400 – $171,850$137,300 – $209,250 33% Bracket$171,850 – $373,650$209,250 – $373,650 35% Bracket$373,650+ Progressive Tax: Tax rate increases as income increases –Ex. Federal Income Tax, GA Income Tax –Wealthy pay higher percentage of income

4 Types of Taxes Regressive Tax: Tax rate decreases as income increases –A fee of $1,000 per household –Sales tax Proportional Tax: Flat tax –Ex. 15% tax on all taxpayers

5 Federal Tax System Individual Income Tax (16 th Amendment) Bureaucracy: Internal Revenue Service Progressive Income Tax Federal Insurance Contributions Act –FICA –Social Security: 6.2% up to $106,800 –Medicare: 1.45% of all earnings –Employers must match payroll deductions

6 Other taxes Corporate Income Taxes –Federal: 35% –State (GA): 6% Combined adjusted: 38.9% Excise Taxes (gas, tobacco, phone, alcohol, airline tickets,.) –Gas: 18.4 cpg; 7.5 cpg + 4% GA –Cigarette: $1.01 pack;. 37 GA Estate Tax (death tax) Gift Tax Customs Duties (ex. Tariffs)

7 Federal Government Expenditures Federal Budget: annual plan of revenues (taxes, borrowing) and spending for year 2011: $3.6 TRILLION Mandatory Spending –Interest on national debt ($217 billion) –Social Security ($723 billion) –Medicare/Medicaid ($825 billion) Discretionary Spending –Defense ($701 billion) –Housing/welfare ($418 billion) –Education ($127 billion)

8 Budget Terms Federal budget surplus: tax revenue is greater than spending in a year Federal budget DEFICIT: amount spending exceeds taxes in a year –2008 deficit: $459 billion –2009 deficit: $1.413 TRILLION –2010 deficit: $1.56 TRILLION –2011 deficit: $1.3 TRILLION National Debt: total amount of all past budget deficits –$14.8 TRILLION

9 How Budgets are Made Step 1: President prepares the budget –OMB: Office of Management and Budget Step 2: Budget sent to Congress Step 3: Appropriations bills sent to committees in House of Representatives Step 4: Senate receives budget, may approve, modify, prepare own Step 5: Budget goes to President to sign

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