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Financing Government

Financing Government. Chapter-16. The Power to Tax. The Constitution gives the government the power to tax “To lay and collect taxes, duties, imposts and excises, to pay the debts, and provide for the common defense and general welfare of the United States.”

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Financing Government

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  1. Financing Government Chapter-16

  2. The Power to Tax • The Constitution gives the government the power to tax “To lay and collect taxes, duties, imposts and excises, to pay the debts, and provide for the common defense and general welfare of the United States.” • Taxes must be for public purposes only • Cannot tax exports • Direct taxes must be equally apportioned

  3. Current Federal Taxes • Income Taxes • Individual Income Tax • A little over 50 % of Americans pay Income Tax • Individual Income Taxes are progressive taxes – the higher the income the higher the tax rate • Corporate Income Tax • A complex tax paid on company income – most corporations pay this tax

  4. Current Federal Taxes continued • Social Insurance Taxes • Social Security Tax (Retirement) • Medicare Tax (Health Insurance) • Unemployment Tax (Jobless Benefits • Excise Taxes • Manufacture Tax paid by the Producer buried in the price of the product • Estate & Gift Taxes • Paid on the value of gifts over $11,000 and on the Estate of the deceased over $600,000. • Custom Duties • Tariffs and import duties paid on imported products `

  5. Borrowing & Public Debt • When there is a shortfall in public revenues the government may borrow to make up the shortfall. The public debt now piled up by the government equals: $ 12,000,000,000,000 March 2010

  6. Spending and the Budget • Controllable and Uncontrollable • Entitlements account for approximately 67% of the budget. Since this is an uncontrollable expenditure it is difficult to balance the budget. • Social Security, food stamps, Medicare, etc. • Discretionary expenditures account for approximately 33% of the budget. This the controllable part of the budget. However, the average budget shortfall of 25% coupled with a controllable budget of 33% makes balancing the budget all but impossible. • Military, transportation, education, etc.

  7. The Federal Budget • Unlike most legislation that begins in Congress and ends at the President. The Budget process starts with the President and ends with the President. • The President lays out broad spending guidelines • The OMB (Office of Management & Budget) fills in the details • Congress through the Appropriations Committees adjust and tinker with the numbers • It is then sent back to the President for signature

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