More Budget Issues

Progressive vs Flat Taxes 10% of taxpayers pay 2/3 of income tax

Gov’t Borrowing gov’t doesn’t have a capital budget and these purchases do count in current operating budget

Gov’t Borrowing text claims Republicans are now more about cutting taxes rather than reducing gov’t spending but that is likely wrong in view of current issues.

Gov’t Borrowing

Taxes and Public Policy tax expenditures - special exemptions. Charities, deduction of interest on mortgage interest, deduction on capitol equipment who do these exemptions benefit? they amount to 1/3 of gov’t’s total receipts

Taxes and Public Policy tax indexing indexed to the cost of living - those families with high incomes saw savings - lower income families saw none because taxes on social insurance and excise taxes rose and those fall disproportionately on lower class citizens

Tax Expenditures A.K.A. Deductions! Tax payers love them! interest on mortgages employer contributions to health care IRA contributions children State and local taxes etc.

Lifetime Learning Credit Hope Credit - 1st two years postsecondary, $1500 per year. Doesn’t apply to postgraduate or professional programs. Enrolled 1/2 time Lifetime Learning Credit - undergrad, professional, graduate. If qualify then 20% of first $10,000 cost -max $2000 per year can’t do both. dependent can’t claim. can claim more than one Hope credit if more than one kid/taxpayer qualifies but only claim one lifetime learning per family

Rise of national security costs Rise of social service state I s big too big? compared to other nations? Eisenhower’s Military Industrial Complex Dept of Defense 1/5 of budget Biggest slice is income security expenditures - intergenerational contract

Incrementalism best predictor is last year’s budget never address base of budget agencies assume they will get equivalent to last year’s budget debate is on the increment budget always grows a little every year exceptions: NASA

Uncontrollable expenditures What? Why is it difficult to change?

Let’s look at gov’t benefits over time What factors cause it to change?

Gov’t benefits over time What factors cause it to change? rising elderly population - rising elderly pop means increasing number of elderly receiving benefits who exert pressure on interest groups shrinking birth rates increased life expectancy voting numbers and rates more effective elderly interest groups (AARP) public awareness of issues for the elderly children can’t vote/organize

create timeline of budget process p 455 create a t chart illustrating how the budget process works through Congress and how it works through the Executive branch use pp