Taxes and Spending

The National Budget  Federal government keeps track of how money is spent over a period of time using a budget …  called the national budget.

Money Available = Revenue Revenue

Budgets  A budget is balanced when revenues equal expenditures.  Deficit = spend more money than you make  Government spends more money than they have…they must borrow to spend = deficit spending  Surplus = money left over after all expenses are paid

Fiscal Policy  Policy about spending and taxation  Based on deficit and surplus

Where does the government’s money go?  Defense  FBI: investigate federal crimes (Dept. of Justice)  DEA: stop illegal drugs from entering the U.S.  ATF: enforce federal laws dealing with alcohol, tobacco, firearms, explosives and arson

Where does the government’s money go?  Entitlement programs (provide individuals with financial benefits)  Dept. of Health and Human Services  Protect the health and safety of Americans and provide human services

Dept of Health & Human Services Agencies  CDC-protect nation’s health and conduct medical research  Medicare-look after the health of elderly Americans or those with special situations (65+)  Medicaid- look after health of low-income citizens  Social Security- provides monthly benefits to retired and disabled workers (65 +)

 Department of Transportation  Set regulations for all public carriers  Planes, trains, automobiles, highways, ferry systems  National Transportation Safety Board (NTSB)  Ensure transportation system meets acceptable safety standards

National Security  CIA-deal with threats from foreign countries  Dept. of Homeland Security- fight terrorism  Patriot Act  FEMA: assist with disaster relief  U.S. Citizenship and Immigration Services  Control immigration and naturalization (process by which aliens become citizens)

To spend money… the government must have money. How does the government make money?

Sources of Revenue  Taxes  Income tax: takes a % of person’s/ company’s earned income  Determined by tax return (filed annually to show earnings and deductions)  Progressive taxation- higher a person’s earnings, the higher the rate of taxation  Regressive taxation- higher rate of taxation the poorer a person is  Proportional taxation- all taxpayers pay the same % no matter their income

 Excise tax- charged on the production and consumption of particular goods and services (ex. telephone and gasoline)  Estate tax – paid on the transfer of property through inheritance  Property is not taxed  Corporate tax- levied on a company’s earnings and its payroll

Other sources of revenue  Tariffs- paid on imports  Fines- penalties levied against individuals (ex. Pollution)  Government bonds- government-issued certificates purchased by an individual or corporation  Allows gov’ts to borrow money on the promise to repay