Government Finances Fiscal Policy Taxing and Spending Fiscal
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Government Finances: Fiscal Policy, Taxing and Spending • • • Fiscal Policy Government Budget Federal Government Revenue Federal Government Expenditures State Government Local Government
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.
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
Federal Government Revenue Federal Taxes Income Tax - #1 source of government revenue. Progressive tax on individual earning. Payroll Tax – 2 nd largest source of income Corporate Income Tax – up to 36% of profits. OTHER FEDERAL TAXES Excise Tax Estate Tax Luxury Tax Social Security Tax
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 %
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.
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
