Federal Revenue and Borrowing Personal and Corporate Income Tax Income tax – Shares of individual wages and corporate revenues collected by the government. Sixteenth Amendment – Explicitly authorized Congress to levy a tax on income 1913 Corporations also pay income taxes, but now do not yield as much revenue as individual income taxes To Learning Objectives LO 15.1
Federal Revenue and Borrowing Borrowing Treasury Department sells bonds when the federal government wants to borrow money. Federal debt – All the money borrowed by the federal government over the years and still outstanding. Today the federal debt is about $18 trillion. Led to calls for a balanced budget amendment Federal gov. does not have a capital budget, a budget that will serve for the long-term. These purchases are counted as current expenditures and run up the deficit. To Learning Objectives LO 15.1
Federal Revenue and Borrowing Taxes and Public Policy Tax Expenditures – Revenue losses from special exemptions, exclusions, or deductions allowed by federal tax law. Represent the difference between what the government actually collects in taxes and what it would have collected without special exemptions. Individuals receive most of the tax expenditures and corporations get the rest. Tax expenditures amount to subsidies for some activity, such as deductions for contributions to charities, business deductions of investment in new plants and equipment. To Learning Objectives LO 15.1
The Balanced Budget Amendment Read the arguments for/against and take notes. Write an argument either for or against the balanced budget amendment (2 pages) Due Friday Examine the costs and benefits of balancing the budget given that most of the budget expenditures are mandated. Identify which benefits and which obligations should be the first to go.
Federal Expenditures Big Governments, Big Budgets Big budgets are necessary to pay for big governments. National, state, and local governments spend an amount equal to one-third of the gross domestic product (GDP). National government spending alone currently represents about one-fourth of the GDP. GDP: Gross national product minus the value of goods and serviced produced outside the country. To Learning Objectives LO 15.2
Federal Expenditures The Rise of the Social Service State The biggest federal spender is now income security programs. Social Security is #1 spender, now it includes disability benefits and Medicare, and its recipients are living longer. This is another reason for government growth. To Learning Objectives LO 15.2
Understanding Budgeting Democracy and Budgeting Many politicians spend money to buy votes. Bigger budgets – Many groups and people ask for government assistance. People like government programs, but they really do not want to pay for them, thus there are deficits and federal debt. To Learning Objectives LO 15.3
FRQ 14.2: Budgetary Process The President and the Congress are both very important in the passage of the federal budget each year. 1. Describe the significance of the House Ways and Means Committee on the budget 2. Describe the significance of the Office of Management and Budget on the budget 3. Describe the significance of the Congressional Budget Office on the budget