How the Government Raises Money Paying For Government How the Government Raises Money

The High Cost of Government Costs an enormous amount of money to run the government Large population that continues to grow Cost of living increases (same amount of money does not buy as much as it used to) Government provides more programs/services than it did in the past Largest expenses of the federal government are benefit programs and national defense (especially after 9/11 attacks) Another reason for high cost of government is debt Government has spent more money than its raised Must pay interest on the debt (amount charged for borrowing the money) National debt- interest + total amount of money the U.S. government has borrowed

Establishing Priorities Most of the money the government raises comes from taxes We should expect the government to spend our tax dollars wisely, regardless if we agree with the taxes or not What programs need the most money or will bring the most benefits to the people? Government must decide which activities need funding in order of their urgency and need Programs with highest priority get funded first There has always been debate over which government programs/services should get top priority

The Purpose of Taxes Chief purpose of taxes is to raise money for the government This money pays the cost of running the government Taxes pay for our schools, hospitals, police and fire forces, infrastructure, national defense, social security, and other necessary programs/services for the elderly, disabled, and poor In other words, WE NEED TAXES TO SUSTAIN OUR COUNTRY

Rules of Taxation Ability to Pay Equal Application Taxes are set at different rates to make it possible for citizens to pay A lot of tax rates depend on your income (the more money you make, the more you are taxed and vice versa) Equal Application Some taxes are applied at the same rate Sales taxes at the grocery store or excise taxes on alcohol and tobacco are the same for everyone purchasing those goods

Rules of Taxation Scheduled Payment Taxes should be paid on a set schedule Employers withhold a portion of taxes from workers’ paychecks or if you’re self- employed, you must set aside a necessary amount of taxes to send to the government Government collects taxes in mid April every year (“tax season”)

Other Methods for Raising Money Fees, fines, and payments for special services Fees are small payments charged for various licenses Hunting, marriage, drivers, entrance to national parks etc. etc. Government collects billions of dollars in fees each years

Other Methods for Raising Money Fines represent money charged for breaking certain laws Speeding, traffic violations, fishing without a license, etc. etc. Some special services are paid for directly by the people who use them Toll roads, parking meters

Government Borrowing More often than not, government must borrow money to meet expenses Large projects like building bridges and schools cost more money than most state or local governments can pay for directly Governments can borrow money from citizens by issuing bonds- certificates stating the government has borrowed a certain amount of money from an individual Promises to repay that loan after a certain date as well as repay the interest Bonds allow governments to raise money for public projects while giving individual investors an opportunity to make a profit

? What are three main reasons why it costs so much to run the government? Why do we need taxes? When it comes to taxes, what is the debate over establishing priorities? What is the difference between fees and fines? What are government bonds?