1. CH. 14: THE CONGRESS THE PRESIDENT AND THE BUDGET

2. Budget- policy allocating burdens (taxes) and benefits (expenditures) Over last 30 years, National Government has run up large annual budget deficits (when expenditures exceed revenues in a fiscal year) Sources of Federal Revenue 3 major sources of federal revenues: 1. Personal (larger than corporate) & corporate income tax 2. Social insurance (social security & Medicare) taxes 3. Borrowing

3. I. Income tax – 16 th Amendment (1913) was passed to make income taxes official and created Internal Revenue Service (IRS) to collect it. The income tax is progressive – the more money, the higher your tax rate. (ex below) Some people feel a flat tax rate is the fairest Corporate taxes yield about 9% of every fed revenue dollar v. 43% from individual Taxes 43% of federal revenues come from individual income taxes

4. II. Social Insurance Taxes Have grown faster than any other source of federal revenue Today they make up about 40% of Federal revenues III. Borrowing Most borrowing is for day to day expenses in the form of bonds Federal debt (all money borrowed over years that is still owed) today is over 16.9 trillion

5. Federal Expenditures (benefits) 2 conditions of growth of government 1. Rise of National Security – 7 million work for Pentagon 2. Rise of Social Services – Social Security Act (1935) (largest social policy) & Medicare (1965) etc. Incrementalism – predicting year before budget plus adding a bit more Entitlements – Congress obligated itself to pay X level of benefits to Y number of recipients ex. Social Security, agricultural subsidies, & veterans’ aid. ***Represents the largest portion of uncontrollable spending in the Federal Budget and are barriers to balancing the budget.

6. Tax BracketMarried Filing JointlySingle 10% Bracket$0 – $17,400$0 – $8,700 15% Bracket$17,400 – $70,700$8,700 – $35,350 25% Bracket$70,700 – $142,700$35,350 – $85,650 28% Bracket$142,700 – $217,450$85,650 – $178,650 33% Bracket$217,450 – $388,350$178,650 – $388,350 35% BracketOver $388,350 FEDERAL INCOME TAX BRACKETS FOR 2012