1. Government Finances: Fiscal Policy, Taxing and Spending
Government Budget
Federal Government Revenue
Federal Government Expenditures
State Government
Local Government

2. Fiscal Policy
Fiscal Policy – government policy toward taxing & spending.
Federal Budget
Prepared annually by the President
Approved by Congress
Budget Year – October 1 – September 30
Government Spending
Mandatory Spending – does not need annual approval.
Discretionary Spending – needs annual approval.
Types of Taxation
Progressive Tax – tax that takes a larger percentage from the wealthy (ability to pay principle)
Regressive Tax – tax that takes a larger percentage from lower incomes (benefits received principal)
Proportional Tax – tax that takes the same percentage from all incomes.

3. GOVERNMENT BUDGET
Government Revenue - $ that government has to operate. Taxes, fines, user fees, etc…
Government Expenditures - $ the government must spend on programs it operates.
Balanced Budget – Revenue = Expenditures
Budget Surplus - Revenue > Expenditures
Budget Deficit - Revenue < Expenditures
National Debt – Accumulation of Budget Deficits

4. Federal Government Revenue
Federal Taxes
Income Tax - #1 source of government revenue. Progressive tax on individual earning.
Payroll Tax – 2nd largest source of income
Corporate Income Tax – up to 36% of profits.
OTHER FEDERAL TAXES
Excise Tax
Estate Tax
Luxury Tax
Social Security Tax

5. Federal Government Expenditure
Social Security – 21.2%
National Defense – 17.4 %
Income Security – 14%
Medicare – 13.5 %
Health – 10.5%
Interest on Debt – 8.2%
Other – 15.2 %

6. State Government
Intergovernmental Revenue - $ paid from one level of government to another. States get it from the federal government.
Sales Tax – Paid by retail stores to the state government. (passed onto consumers)
Income Tax – taken from workers paychecks.
Excise Tax – Alcohol, tobacco, & gasoline.

7. Police & Fire Protection
Local Government
REVENUE
Intergovernmental Revenue – paid by the state government to local governments.
Property Tax – paid on land, houses, automobiles, etc…
EXPENDITURES
Education
Police & Fire Protection
Water Supply
Sewage & Sanitation

8. FEDERAL INCOME TAX TABLE
TAX RATE
SINGLE
MARRIED
10%
$0-$8,025
$0-$16,050
15%
$8,025-$32,550
$16,050-$65,100
25%
$32,550-$78,850
$65,100-$131,450
28%
$78,850-$164,550
$131,450-$200,300
33%
$164,550-$357,700
$200,300-$357,700
35%
Over $357,700