1. Ch. 15 The Gov’t at Work: The Bureaucracy What is a Bureaucracy? A large, complex administrative structure that handles the everyday business of an organization. A large, complex administrative structure that handles the everyday business of an organization. 3 Characteristics of a Bureaucracy: Hierarchical authority- Makes it clear who has the power. Hierarchical authority- Makes it clear who has the power. Job specialization- Each person has a specific job, work is done more efficiently. Job specialization- Each person has a specific job, work is done more efficiently. Formalized rules- Decisions based on rules and standards. Formalized rules- Decisions based on rules and standards.

2. Major Elements of the Federal Bureaucracy The Federal Bureaucracy is located in the Executive Branch. All people, agencies and procedures. All people, agencies and procedures. Two departments anticipated by the Constitution: 1. Dept. for Foreign Affairs 2. Dept. for the Military

3. What’s with all the names? Executive Branch Units Department- reserved for agencies of cabinet rank. (Defense, Justice) Department- reserved for agencies of cabinet rank. (Defense, Justice) Agency- used to refer to any gov’t body. (EPA) Agency- used to refer to any gov’t body. (EPA) Administration- also, a gov’t body, usually more specific. (NASA) Administration- also, a gov’t body, usually more specific. (NASA) Commission- agencies charged with regulation of business activities. (FCC, SEC) Commission- agencies charged with regulation of business activities. (FCC, SEC) Corporation/authority- agencies that conduct business-like activities. (FDIC) Corporation/authority- agencies that conduct business-like activities. (FDIC)

4. What’s with all the names? Staff and Line Agencies Staff Agency- serve in a support capacity. Aid chief executive and other administrators. Staff Agency- serve in a support capacity. Aid chief executive and other administrators. (White House Office, Nat’l Security Council) Line Agency- perform tasks, usually with the help of staff agencies. Line Agency- perform tasks, usually with the help of staff agencies. (Environmental Protection Agency)

5. Financing the Government Chapter 16

6. The Income Tax Authorized by the 16 th Amendment Largest Source of Federal Revenue Flexible Tax – rates can be adjusted Progressive Tax – the higher the source of income, the higher the tax

7. Individual Income Tax The tax on individuals’ income regularly produces the largest amount of federal tax revenue. Tax is levied on each person’s taxable income minus exemptions and deductions. April 15 th – everyone who has earned taxable income must file a tax return (declaration of income). Individual Income taxes are filed with the IRS

8. Corporate Income Taxes Corporations pay taxes on its net income (earnings minus costs). More complicated than individual taxes because of the many deductions. Non-profit organizations and charitable foundations are not subject to corporate income taxes.

9. Payroll Taxes Social Security Medicare Unemployment Compensation Regressive taxes – levied at a flat rate without regard to the taxpayers income. The IRS collects the money and places it into trust accounts maintained by the Treasury (Congress appropriates funds).

10. Excise Taxes A tax laid on the manufacture, sale, or consumptions of goods and/or the performance of services. Taxes on gas, oil, tires, tobacco, alcohol, firearms, telephone services, airline tickets, etc. Often called “hidden taxes” or “luxury taxes” or “sin taxes.

11. Estate and Gift Taxes Estate Tax – a levy imposed on the assets of one who dies. The first $1.5 million of an estate is exempt from federal tax. Gift Tax – a tax imposed on the making of a gift by a living person. Any person may make up to an $11,000 in tax-free gifts to another person in one year.

12. Customs Duties Taxes laid on goods brought into the U.S. Also known as tariffs, import duties, or imposts. Congress decides which imports will be dutied and at what rates. Customs were a major source of federal income for over a century. Now they make up less that 1% of all the money the government makes in each year.

13. Non-tax Revenues A large amount of earnings of the Federal Reserve comes from interest. Interest is a charge for borrowing money (generally a percentage of the amount borrowed). The interest from loans made by other federal agencies generate large sums of money. The Treasury Department also makes money by minting coins (difference between the cost of the materials and the value of the coin) and commemorative stamps.

14. Borrowing Congress has the power to borrow money on the credit of the U.S. (Article 1, Section 8, Clause 2). The government generally borrows money as a way to meet the costs of a short-term crisis or a large-scale project. In recent decades, the Federal Government has borrowed money for another reason: deficit spending (when the government spends more money than they bring in on tax revenues).