Sources of Government Revenue and Spending

Types of Taxes 1. Proportional - same percentage on everyone regardless of income example: flat tax, tithe, poll tax 2. Progressive - imposes a higher percentage rate of taxation on higher incomes Example: income tax 3. Regressive - imposes a higher percentage on low incomes than on high incomes taking higher percentage of a persons income example: Sales tax

Federal Tax System 1. Individual Income Tax (progressive) Payroll withholding system taken right out of your check and sent to the IRS tax return if they take too much, you get at return if they take too little, you have to pay

FICA Taxes Federal Insurance Contributions Act Employers and Employees both pay 1. Medicare (1965) (flat tax=1.45%) 2. Social Security (flat tax=6.2%) (turns regressive after you've reached the limit of $113,700)

Smaller Taxes Excise Tax - on the manufacture or sale of select items or services sin tax luxury goods, gaming, telephone service Estate tax - transfer of property Gift tax - on donations of money or wealth paid by the person who makes the gift A gift of $14,000 or less in a calendar year Customs duty - on goods brought in from other countries Congress decides what goods to tax

State Tax Systems 1. Intergovernmental revenue 2. Sales tax counties as well Alaska, Montana, New Hampshire, Delaware, and Oregon do not have general sales taxes Hospital Fees, tuition and other fees collected from state colleges and technical schools Lotteries half on prizes 6% on administration

Local Tax Systems Intergovernmental Property taxes assessed upon the estimated value of the property usually paid with mortgage 80% of local revenue goes to schools Public utilities Sales tax

Government Spending 1. Goods and Services military, tanks, planes, supplies, hire personnel, land, schools, etc. 2. Transfer payments no goods or services Welfare, Unemployment, Social Security, disability

Federal Government Expenditures Federal Budget Mandatory Spending does not need congressional approval Discretionary spending needs congressional approval Fiscal year Appropriations Bills- to the House- to the Senate

The National Debt Deficit accidental and on purpose Leads to more taxes Venn Diagram p. 277