mandatory spendingdiscretionary spending spending congress doesn’t have to approve annually...
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CH. 25 GOVERNMENT FINANCES
STANDARD EE 1.1, 3.1, CG 2.2, 2.7
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THE FEDERAL GOVERNMENT• MUST PASS A BUDGET FOR EACH FISCAL YEAR (OCT. 1 – SEPT. 30)
OUTLINING TAXING AND SPENDING POLICY
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TYPES OF SPENDING
• APPROPRIATIONS BILLS FOR EACH DEPARTMENT ARE PASSED ANNUALLY BY CONGRESS APPROVING SPENDING FOR CERTAIN PROGRAMS
Mandatory Spending Discretionary Spending
spending Congress doesn’t have to approve annually because it is tied to some mandatory program
money that Congress must approve
Examples:Social Security, Medicare, interest on the national debt
Examples:Defense, Transportation, National Security
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REVENUES - INCOME• MOST COMES FROM INCOME TAXES - TAXES ON THE WORKERS’
EARNINGS
• PAYROLL TAXES – WITHHELD FROM A PERSON’S EARNINGS FOR CERTAIN PROGRAMS
• SOCIAL SECURITY, MEDICARE
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OTHER TAXES
• Estate Tax – percentage of a person’s wealth
when they die
• Excise Taxes – on alcohol, tobacco, gasoline,
telephone service
• Fees – entrance to national parks, museums,
stamps, etc.
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EXPENDITURES - SPENDING• MANDATORY SPENDING (SOCIAL SECURITY, MEDICARE, NATIONAL DEBT
INTEREST, ETC.) MAKES UP OVER TWO-THIRDS OF THE BUDGET
• DISCRETIONARY SPENDING MAKES UP THE OTHER THIRD (DEFENSE, TRANSPORTATION, EDUCATION, ETC.)
• DEFENSE IS THE SINGLE LARGEST DISCRETIONARY EXPENSE IN THE BUDGET
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NATIONAL DEBT• WHEN THE GOVERNMENT SPENDS MORE THAN IT MAKES IN TAXES
THERE IS A DEFICIT
• WHEN EACH YEAR’S DEFICIT IS ADDED TO THE PREVIOUS YEARS’ BORROWINGS YOU HAVE THE TOTAL NATIONAL DEBT (CURRENTLY OVER $18 TRILLION – 2015)
• BALANCED BUDGET – REVENUES = EXPENDITURES
• OCCASIONALLY A SURPLUS IS RECOGNIZED – REVENUES > EXPENDITURES
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STATE AND LOCAL GOVERNMENTS
• MOST MUST DEVELOP A BALANCED BUDGET – NO DEFICIT
• SOURCES OF REVENUE
• INCOME TAXES – PERCENTAGE OF INCOME
• SALES TAXES – PERCENTAGE OF PURCHASE PRICE
• PROPERTY TAXES – BASED ON VALUE OF PROPERTY OWNED
• FINES & FEES – FOR USING RESOURCES (PARKS, LANDFILL, ETC.) OR PENALTIES (SPEEDING TICKETS)
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TYPES OF TAXATION
Progressive Taxation Regressive TaxationTax rate changes based on a person’s income level (higher rate for higher incomes)
Tax rate is the same regardless of income level
Income Taxes Fees, excise taxes, sales taxes, flat tax
Progressive vs Regressive Taxation
Which is more fair?
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EXPENDITURES• ENTITLEMENT PROGRAMS – MUST ADMINISTER PUBLIC WELFARE PROGRAMS ADDING STATE MONEY TO FEDERAL MONEY (UNEMPLOYMENT, MEDICARE, ETC.)
• EDUCATION – PUBLIC SCHOOLS AND STATE SUBSIDIZED UNIVERSITIES AND COLLEGES
• INFRASTRUCTURE – MAINTENANCE OF HIGHWAYS, RAILS, BRIDGES, AIRPORTS, ETC.
• SERVICES – CORRECTIONS, POLICE, FIRE/RESCUE, LIBRARIES, WATER/SEWAGE, SANITATION, ETC.