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Sources of Federal Revenues

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Presentation on theme: "Sources of Federal Revenues"— Presentation transcript:

1 Chapter 14: The Congress, The President, and The Budget: The Politics of Taxing and Spending

2 Sources of Federal Revenues
Income Taxes: individual wages & corporate revenues Social Insurance Taxes: money taken from employee’s paychecks & match with employer. Barrowing: Excise Taxes:

3 Budgetary Demands & Borrowing Money
The two contradictory budgetary demands of most Americans are to increase the level of governmental spending and to keep taxes low. The government borrow money by the Treasury Department sells bonds, guaranteeing to pay interest to the bondholder.

4 Congressional Budget & Impoundment Control Act of 1974
Was designed to reform the congressional budgetary process. The act accomplished the following: A fixed budget calendar: Now has a time line mandated by law which has been amended several times.

5 Continued…. A budge committee in each house: Congress has to agree on the total size of the budget, which guides the Appropriations Committee to juggling figures for individual agencies. A Congressional Budget Office: advises Congress on the probable consequences of its budget decisions, forecasts revenues, and is a counterweight to the President’s

6 Ten Main Actors in in the budgetary process
Interest groups: lobbyists lay the foundation for interest groups by advertising the group’s cause. Agencies: agencies are motivated groups of people that push for higher budget requests and can get a chance to present themselves before congressional committees. Office of Management and Budget: responsible to the president but is divided up into may agencies because of the vast of amount of information; major actors in budgetary process

7 Ten Main Actors in in the budgetary process continued…..
President: makes decisions about what will be proposed to Congress concerning the budget and governmental spending Tax Committees in congress: the House Ways and Means and the Senate Finance Committee are in charge of writing tax codes which require the approval of Congress. Budget committees: sets parameters of congressional budget process by examining expenditures and revenues; propose resolutions to ensure the limits of Congress.

8 Ten Main Actors in in the budgetary process continued…..
Appropriations Committees: “who gets what”; take old/ new policies from subject matter committees and decide how much to spend. Congress as a whole: approves taxes and appropriations; members look for places of interest to add into the budget (dams and military bases). Government accountability office: audits, monitors and evaluates how and what agencies are doing with their budget. Subject matter committees: writes new laws, leads to new expenditures

9 Balanced Budget A balanced budget is when the total sum of money a government collects in a year is equal to the amount it spends on goods, services, and debt interest. If the United States required a balanced budget, the federal government could not borrow money to provide more services during economic crisis, nor could it cut taxes to stimulate the economy in the crisis.

10 Tax Reform Act of 1986 This was passed to try to reform taxes. Three reforms it made were: it eliminated or reduced the value of many tax deductions, removed several million low income individuals from tax rolls, and it greatly reduced the number of tax brackets.

11 Budget Resolution A budget resolution is a resolution binding Congress to a total expenditure level, supposedly the bottom line for all federal spending for all programs. The way laws change to meet it are: Reconciliation- process through which program authorizations are revised to achieve required savings. It usually also includes tax or other revenue adjustments. Authorization bill- an act of congress that establishes, continues, or changes a discretionary government program or entitlement. It specifies program goals and maximum expenditures for discretionary programs.

12 Increment Budgeting Increments (constant growth)
Base on previous year decision Very little attention on budgetary base amounts Agencies safely assume they will get at least the budget they had previous year Focus on proposal increment in budgetary process Budget for agencies grow little bit every year

13 Gramm-Rudman-Hollings Act (1987-1990)
Balanced Budget and Emergency Deficit Control Act cosponsors: Senators Phil Gramm, Warren Rudman, Ernest Hollings Mandated maximum allowable deficit levels for each year until 1993 when budget supposed to be balanced Sequestration: (automatic cross-the-board spending cuts) be ordered by president if congress failed to meet the deficit goals ½ from defense and ½ from domestic programs Congress abandoned it in 1990

14 Government Growth Congress incentives:
Use both constituency services and pork-barrel policies to deliver benefits to folks back at home Politicians spend money to “buy” votes Not corruptly Rather policymakers spend money to earn votes Equality of suffrage: parties must appeal to a mojority of voters

15 Review Questions 1. What are the four sources for federal revenues?
A. interest groups, agencies, tax committees, and Congress B. President, tax committees, the subject, and agencies C. Income tax, social insurance tax, borrowing, and taxes & public policy 2. What does the phrase "military industrial complex" mean? A. revenue losses that result from special exemptions, exclusions, or deductions on federal tax law B. to characterize the close relationship between the military hierarchy & the defense industry that supplies its hardware needs C. an act of Congress that actually funds programs within limits established by authorization bills.

16 3. What are 4 expenditures of the federal budget?
A. interest groups, tax committees, Office of Management & Budget, and appropriations committees B. individuals, national defense, non-defense, and net interest C. Office of Management & Budget, Government accountability office, tax committees, and Budget Committees & the Congressional Budget Office 4. The following are provisions of the Congressional Budget and Impoundment Control Act of 1974 except A. Authorization bill B. a fixed budget calender  C. a budget committee in each house D. a congressional budget office 

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