Taxing and Spending

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Taxing and Spending
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Taxes

• Payments by individuals and businesses to support
  the activities of government
• shall have power to lay and collect taxes,
  duties, imposts, and excises, and to pay the
  debts and provide for the common defense and
  general welfare of the United States

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Income Tax

• Biggest single source of revenue
• 44 of all sources
• Deductions lowers your taxable income
• Dependants, interest on a mortgage, items
  purchased for a job

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Income Tax

• Progressive Tax based on a taxpayers ability
  to pay
• The higher the income, the higher the tax rate
• Those with higher incomes often have more
  available deductions to make it seem less
  progressive

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Filing Tax Returns

• Deadline is April 15th
• After receiving tax forms from employer and
  other sources of income
• Self-employed must also calculate their yearly
  income, but make payments 4 times a year to
  avoid pay one large amount

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Internal Revenue Service (IRS)

• Collects taxes and processes returns
• Audit may check return documents more closely
  to catch any errors
• May also search for criminal violations of tax
  laws

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Corporate Taxes

• Federal government taxes corporations beyond its
  expenses and deductions
• 12 percent of federal revenue
• Non-profit organizations are exempt from this
  tax
• Colleges, Unions, Churches

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Social Security Taxes

• Also includes Medicare and unemployment
  compensation
• Both employees and employers pay
• Deducted from paychecks
• Regressive people with lower income usually
  pays a larger portion of their income

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Excise Taxes

• Taxes on the manufacture, transportation, sale,
  and consumption of certain goods
• Gasoline, oil, tires, tobacco products, liquor,
  and airline tickets
• Sometimes called luxury taxes
• Over 50 billion raised every year
• Especially from tobacco and liquor

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Duties and Tariffs

• Taxes of goods imported into the country
• Protection for our nations industries,
  agriculture, and other businesses
• Helps the govt raise revenue
• May help our prices become more competitive

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Estate and Gift Taxes

• Estate person who dies may give assets to a
  living person
• Tax on money or property passed down
• Gift if a person gives more than 10,000 to
  another individual

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Borrowing for Revenue

• Securities govt sells to individuals and
  corporations (bonds)
• Lending the govt money
• Safe investment and investors will earn interest

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National Debt

• Currently over 9 trillion
• When the governments spending is greater than
  its income, it must borrow and go into debt
• Obviously it accumulates overtime

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Managing the Economy

• Federal Government

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Comparisons

• US vs UK
• US has almost triple the revenue
• US more than triple in spending
• US vs Japan
• US more than double the revenue
• US almost doubles in spending

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Legislative and Executive

• Congress appropriates the money
• Assigns spending plans
• Executive agencies carry out these spending
  plans by providing services to society

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Where does the money go?

• National Debt (over 9 trillion)
• Interest payments
• Direct benefit payments such as
• Social Security (largest entitlement)
• Social Welfare
• Health care programs
• These three account for almost ½ of spending

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Where does the money go?

• Discretionary Spending
• Environment, Transportation, Criminal Justice
• Federal Grants given to states and localities
• Increased reliance on federal grants has led to
  increased federal influence over state and local
  governments

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Capitalism?Free Enterprise?

• How much control should the government have on
  the economy?
• Fiscal Policy spending and taxing to influence
  the economy
• Monetary Policy controlling the supply of money
  and credit to influence the economy Federal
  Reserve System

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Fiscal Policy

• To stimulate the economy
• Spend more than is brought in
• Effects increased economic activity
• - Puts people back to work
• Reduce taxes
• Effects gives people more purchasing power

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Fiscal Policy

• Due to spending more than what is brought in,
  this creates deficit spending
• 9 trillion National Debt
• Interest payments are almost as high as national
  defense costs

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Monetary Policy

• Citizens exchange goods and services with money
  and credit
• Federal Govt holds the power to coin money and
  regulate its value
• Controls the economy
• Regulate supply of money
• Regulate cost of borrowing money
• Interest Rates

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Federal Reserve

• The bankers bank
• When banks need money they may go to the Federal
  Reserve
• Board of Governors appointed by the President
  approved by Senate

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Board of Governors

• Determines general money and credit policies
• May set rates for banks to borrow money (loans)
• May set amount required for banks to keep in the
  reserve to cover deposits
• May buy government bonds which stimulates the
  economy