Taxes & Government Budget Budget deficits & debt

3 Types of Taxes Progressive- Regressive- Flat Higher % as income rises Example: Federal Income Taxes Regressive- Consumes larger % of lower income worker’s salary Example: Gasoline Tax, Bridge Tax Flat Same % for everyone Example: Sales Tax

Federal Gov’t Taxes Federal Income Tax Social Security Tax- Progressive Tax: tax rate increases as income increases Social Security Tax- 6.2% of salary on first $110,000 income Your employer also pays 6.2%!! Benefit: Receive monthly Gov’t pension starting at 65 (or older) Medicare Tax 1.45% of entire salary Why: Gov’t health insurance starting at 65

2013 Federal Tax Rate Brackets Bush Tax cuts are now permanent Single Married filing Jointly or Qualifying Widow(er) 10% Up to $8,925 Up to $17,850 15% $8,926 – $36,250 $17,851 – $72,500 25% $36,251 – $87,850 $72,501 – $146,400 28% $87,851 – $183,250 $146,401 – $223,050 33% $183,251 – $398,350 $223,051 – $398,350 35% $398,351 – $400,000 $398,351 – $450,000 39.6% $400,001 + $450,001 + Standard Deduction $6,100 $12,200 Bush Tax cuts are now permanent New top bracket

New Tax Rates with higher standard deduction & reduced tax write offs

The Government Budget Government Revenue Government Spending All Gov’t Expenses Taxes

2014 Budget Summary Spending: $3.651 Trillion dollars 2019 Proposed Numbers Spending: $3.651 Trillion dollars Revenue: $3.002Trillion (from taxes) Deficit: $649 Billion Debt: $21.6 Trillion (2018) $4.4 Trillion $3.4 Trillion $950 Billion $22.6 Trillion

Budget Handout

Government Spending Social Security 22.0% Medicare 14.0% Medicaid 7.0% Interest on Debt 6.0% Defense Spending 18.0% Homeland Security 1.0% Education 2.0% Other 26.0 Total 100.0% 46% of Budget 24% of Budget

THANK YOU!

US Demographic Problem! America’s population is aging Babyboomers beginning to retire average life span has risen By 2040 1 in 4 Americans will be over 65 Millennial’s birthrate is very low Demographics ensures entitlement spending will increase at a rapidly growing rate! Projected to rise from 46% => 70% of Budget by 2040

Not Enough Workers? The ratio of workers to retirees is falling This means less money coming in => more going out

Politicians & Entitlements

Growth of Entitlements . 1964 . 1984 2004* 9% 19% Defense Social Security Medicare & Medicaid Net interest All other spending *Current services estimate. Source: Budget of the United States Government, FY 2005, Office of Management and Budget.

Entitlement Reform? .

Balancing the Budget? “The only real question” is whether adjustments to taxes and spending will come from a “careful and deliberative process” or from a “rapid and painful response to a looming or actual fiscal crisis,” Ben Bernanke 2010

Deficit & Debt relative to GDP Current Deficit = $649 Billion (2016 numbers) Current Debt = $20.4 Trillion Current GDP = $19.0 Trillion Deficit as % of GDP = 3.4% of GDP Highest since World War II Recent high (1983) 6% of GDP Debt as % of GDP =107.0% of GDP Highest ever (1946) was 120% of GDP

NATIONAL DEBT AS % OF GDP 20.4Trillion GDP 19.0Trillion 107 % GDP . WWII = 125%