1. Chapter 14:
The Federal Budget

2. Vocabulary TERMS DEFINTION *Continuing Resolution
a joint resolution, passed by Congress and signed by the president, that allows the government to operate at current funding levels for a fixed period; required when Congress and the president cannot reach agreement on a new budget 
*Corporate
Income Tax
a tax paid by businesses on their profits each year
Earmarks
specific spending proposals that members of Congress attach to legislation, usually to benefit their home districts or states
*Entitlements
benefits that must be provided to all eligible people who seek them; examples include Social Security and Medicare
Federal
Deficit
the amount by which the national government’s annual expenditures exceed its revenues

3. Vocabulary *Fiscal Year Impoundment *Mandatory Spending *National Debt
TERMS
DEFINITION
*Fiscal
Year
the 12-month accounting period an organization uses for budgeting, record keeping, and financial reporting
Impoundment
the refusal by a chief executive to spend funds that have been appropriated by the legislature
*Mandatory
Spending
government expenditures required by law to be allocated in specified ways
*National
Debt
the amount of money a country owes to lenders 
Tax
Freedom
Day
the date, calculated each year, when the country has earned enough income to pay its annual tax burden; rising budgets have pushed this date back over time 

4. The Budget
QUESTIONS
ANSWERS
1. What is the difference between having a “BALANCED BUDGET” and a “BUDGET SURPLUS?”
BALANCED=
REVENUES=EXPENDITURES
SURPLUS=
REVENUES >EXPENDITURES
2. When is the only time that the US experienced a federal deficit?
WAR!
3. Which president used the power of “IMPOUNDMENT” and why?
NIXON=
He refused to spend billions of appropriated dollars on federal programs that he did not approve of

5. 4 Phases of the Budget Cycle
DESCRIPTION
Executive Branch
Prepares Budget Proposal
Reflects the vision of the President and their administration and the needs of the country
2. Congress
Drafts a
Budget Resolution
House and Senate Budget committees edit it prioritizing spending or cuts
3. Congress Enacts
Appropriations
Congress works on the 13 appropriation categories of the budget and awaits presidential approval
4. New Fiscal Year Begins…
OR DOES IT???
President+Congress Agree= Budget
If they do not agree= Continuing Resolution  Budget Crisis

8. 39% 32% 13% 3% NA INDIVIDUAL INCOME (PROGRESSIVE) SOCIAL INSURANCE
TAX
WHO/WHAT?
WHY?
% OF REVENUE
INDIVIDUAL
INCOME
(PROGRESSIVE)
 a tax levied on the annual income of an individual or a married couple
Individual citizens need to provide support to public goods and services
39%
SOCIAL
INSURANCE
(REGRESSIVE)
a tax used to fund government assistance to the elderly and to unemployed or disabled workers
They need support and cannot provide for themselves
32%
CORPORATE
a tax paid by businesses on their profits each year
Profits gained by businesses are thanks in part to the US
13%
EXCISE
a tax levied on the sale of certain goods and services
“Sin” taxes on alcohol, tobacco, firearms, etc. 3%
PROGRESSIVE
any tax in which the burden falls more heavily on the rich than the poor
Wealthier individuals can take on a greater tax burden NA
REGRESSIVE
any tax in which the burden falls more heavily on the poor than the rich, at least as a percentage of their incomes
Proportional tax rates that taxes everyone equal percentages

9. Progressive, Regressive & Proportional Tax Rates

11. Government Spending MANDATORY SPENDING DISCRETIONARY
CATEGORY
DESCRIPTION
MANDATORY
SPENDING
Spending that the government HAS to spend
52% of Mandatory Spending is on entitlements (Social Security, Medicare, etc.)
About 65% of tax revenue is spent mandatorily
DISCRETIONARY
Spending that can be DETERMINED
52% of Discretionary Spending is on Defense

17. Homes, property, land, etc.=primary source of income for local gov.
TAX
WHAT IS IT?
PROS
CONS
SALES
Sale on general goods
Easy to collect
Regressive
PROPERTY
Homes, property, land, etc.=primary source of income for local gov.
Hard to hide
Tax may not reflect owner’s ability to pay
INDIVIDUAL
INCOME
State residents (43 states)
Progressive Tax (1% on lower incomes to 10% on higher incomes)
People may move to states that do not have it
EXCISE
“Sin” tax
Easy for politicians to justify
May encourage illegal trafficking
LOTTERY
Legal gambling
Provides money for public services
Regressive and geared towards low income
BONDS
Debts issued by gov. for specific cause
Helps fund large projects with citizen support
Debt can be a heavy burden on future taxpayers
INHERITANCE
AND ESTATE
Those who inherit estates
Progressive
May discourage savings
USER
FEES
Use of public goods, services, or facilities
Those who want public services support them through paying
Low income may not be able to afford services