1. Taxes, Government Spending, and Borrowing
Fiscal Policy
Taxes, Government Spending, and Borrowing

2. Fiscal Policy
Definition: Use of government spending and revenue collection to influence economy
Goals:
Promote economic growth and stability
Social policy programs with economic effects
Social Security
TANF (temporary assistance to needy families)
Food stamps
Medicare
Medicaid

3. Types of Taxes Progressive Tax: Tax rate increases as income increases
x Yea:
Filing Status:
Progressive Tax: Tax rate increases as income increases
Ex. Federal Income Tax, GA Income Tax
Wealthy pay higher percentage of income
Tax Bracket
Single
Married Filing Jointly
10% Bracket
$0 – $8,375
$0 – $16,750
15% Bracket
$8,375 – $34,000
$16,750 – $68,000
25% Bracket
$34,000 – $82,400
$68,000 – $137,300
28% Bracket
$82,400 – $171,850
$137,300 – $209,250
33% Bracket
$171,850 – $373,650
$209,250 – $373,650
35% Bracket
$373,650+

4. Types of Taxes Regressive Tax: Tax rate decreases as income increases
A fee of $1,000 per household
Sales tax
Proportional Tax: Flat tax
Ex. 15% tax on all taxpayers

5. Federal Tax System Individual Income Tax (16th Amendment)
Bureaucracy: Internal Revenue Service
Progressive Income Tax
Federal Insurance Contributions Act
FICA
Social Security: 6.2% up to $106,800
Medicare: 1.45% of all earnings
Employers must match payroll deductions

6. Other taxes Corporate Income Taxes
Federal: 35%
State (GA): 6%
Combined adjusted: 38.9%
Excise Taxes (gas, tobacco, phone, alcohol, airline tickets, .)
Gas: cpg; 7.5 cpg + 4% GA
Cigarette: $1.01 pack; . 37 GA
Estate Tax (death tax)
Gift Tax
Customs Duties (ex. Tariffs)

7. Federal Government Expenditures
Federal Budget: annual plan of revenues (taxes, borrowing) and spending for year
2011: $3.6 TRILLION
Mandatory Spending
Interest on national debt ($217 billion)
Social Security ($723 billion)
Medicare/Medicaid ($825 billion)
Discretionary Spending
Defense ($701 billion)
Housing/welfare ($418 billion)
Education ($127 billion)

8. Budget Terms
Federal budget surplus: tax revenue is greater than spending in a year
Federal budget DEFICIT: amount spending exceeds taxes in a year
2008 deficit: $459 billion
2009 deficit: $1.413 TRILLION
2010 deficit: $1.56 TRILLION
2011 deficit: $1.3 TRILLION
National Debt: total amount of all past budget deficits
$14.8 TRILLION

9. How Budgets are Made Step 1: President prepares the budget
OMB: Office of Management and Budget
Step 2: Budget sent to Congress
Step 3: Appropriations bills sent to committees in House of Representatives
Step 4: Senate receives budget, may approve, modify, prepare own
Step 5: Budget goes to President to sign