Government's Role in Business

Objectives To differentiate among the roles of government in business To describe types of governmental activities in business To explain the role of the legal system in business To identify the role and impact of organized labor in business

The government fulfills many roles and performs many activities in business

Promoting Economic Growth The government: increases/decreases tax rates regulates amount of money in the economy with the Federal Reserve Bank negotiates international treaties and trade agreements

Promoting Competition Acts passed to ensure competition: Sherman Antitrust Act of 1890 allows the government to break up companies with control of a market prevents monopolies Clayton Antitrust Act of 1914 passed to amend and clarify the Sherman Antitrust Act Federal Trade Commission Act of 1915 established the Federal Trade Commission Federal Trade Commission promotes fair competition prevents false/deceptive advertising

Regulating & Deregulating Industries Regulation is when the government sets strict rules affecting businesses within certain industries Deregulation is the removal or relaxation of the rules affecting businesses within certain industries There has been a movement toward deregulation in many industries since the 1970s

Training and Supporting Business The government: provides information and training publishes information businesses can use rate of inflation, unemployment, consumer spending provides direct loans, loan guarantees and subsidies of various types established the Small Business Administration provides low-cost loans, advice and other assistance to small businesses

Providing Trained Workers The government regulates: public schools, which offer instruction in skills relating directly to jobs in business funding for rehab and retraining of workers state and local employment agencies

Buying Industry's Products Buys goods and services provided by private industry Constructs and provides maintenance for transportation systems Maintaining Means of Transportation

Protecting Consumers The government creates laws and agencies protecting the eight basic rights of the consumer Examples: Consumer Product Safety Commission Fair Packaging and Labeling Act Fair Credit Reporting Act

Protecting Employees Employees are protected through numerous government legislations designed to provide a safe work environment provide freedom from discrimination and harassment protect from unlawful termination ensure certain rights to privacy provide the right to participate in labor unions establish minimum wage

Protecting Investors Laws require corporations to disclose information affecting shareholders’ investment decisions, such as financial statements Shareholders have the right to vote on major decisions affecting the company Shareholders are entitled to receive dividend payments if the board declares dividends for the company’s stock Shareholders are prevented from gaining an advantage at the expense of other shareholders through insider trading laws

Protecting the Natural Environment Environmental Protection Agency (EPA) established in 1970 created to protect the natural environment in which we live stresses clean air, land and water creates laws to prevent businesses from harming the environment

Government's Role as Tax Collector

Goods and services provided by the government are paid for through various taxes Income from taxes is used to fulfill previously discussed roles and activities

Personal Income Taxes Are a percentage of total income deducted from your paycheck Are a graduated tax- the more money you make, the higher percentage of taxes you pay Are also paid by sole proprietorships and partnerships on business profits Examples: Federal Individual Income Tax State Individual Income Tax Social Security Tax (FICA)

Corporate Income Taxes Are federal taxes paid on corporate profits Are also imposed by state, local and foreign governments

Property Taxes Sales Taxes Are paid by businesses on land, structures and other property they own Are added to the price of goods and services at the time of purchase Are added to merchandise sold at the retail level Sales Taxes

Excise Taxes Are designed to control potentially harmful practices Are automatically included in the price Produce income which must be used for a purpose related to the tax Examples: gasoline tobacco alcoholic beverages air travel

Customs Duties Are also called import taxes Are fees imposed on goods brought into the country Are designed to protect U.S. businesses against foreign competition Raise the price of imports to a level comparable to the price of domestic merchandise

Tariffs Are a special tax placed on foreign goods sold in the United States Are used to achieve two effects: lower prices and increase imports (reduce tariffs) raise prices and reduce imports (increase tariffs)

The U.S. Legal System

Three Branches of Government Executive Branch headed by the U.S. President Legislative Branch includes the two houses of Congress 1. the House of Representatives 2. the Senate Judicial Branch is the U.S. courts

Three Main Types of U.S. Law Statutory Law Administrative Law Common Law

Statutory Law Is written by the legislative branch Example: the Uniform Commercial Code (UCC) is a set of standardized laws governing business transactions is adopted in most states throughout the United States

Administrative Law Is rules, regulations and interpretations of statutory law set forth by administrative agencies and commissions Is enforced on corporations by administrative agencies

Common Law Is based on precedents established by judges’ decisions Began in England

Organized Labor in Business Labor Unions are organizations formed to represent workers and prevent unfair labor practices has members who are typically employees of the same type of occupation or industry Wagner Act of 1935 is also known as the National Labor Relations Act gives workers the right to organize a union and bargain with management

Collective Bargaining Is when union representatives and management come together to discuss issues arising between employees and employers Union workers strike when an agreement cannot be reached Examples for discussion: pay, working conditions, work hours, benefits

Taft-Hartley Act of 1947 Stopped: Legalized: feather bedding labor unions forcing companies to hire unnecessary workers closed shop requiring businesses to hire only union members Legalized: right-to-work laws allows employees the right to work for a company whether or not they decide to join the union

Assessment List two ways the government promotes economic growth. What was the purpose of Congress passing the Sherman Antitrust Act of 1890? List three ways the government protects employees.

Assessment Why was the Environmental Protection Agency created in 1970? What is the difference between personal income taxes and corporate income taxes? Define tariff.

Assessment List the three branches of the U.S. legal system. (T/F) Common Law is law based on precedents established by judges’ decisions. What is a labor union? What did the Taft-Hartley Act of 1947 help to legalize?

Acknowledgements Production Coordinator Krista Scott Environmental Protection Agency. www.epa.gov Federal Trade Commission. www.ftc.org Small Business Administration. www.sba.gov U.S. Consumer Product Safety Commission. www.cpsc.gov Production Coordinator Krista Scott Production Manager Geoff Scott Graphics Editor Allison Mangold Executive Producer G.W. Davis © MMIII, MMIV CEV Multimedia, Ltd.