Presentation Transcript

1. Unit 7 Macroeconomics: Taxes, Fiscal, and Monetary Policies Chapters 14.4 Economics Mr. Biggs
2. State and Local Taxes and Spending State Budgets The federal government has just one budget, but states have two budgets: Operating budgets Capital budgets Operating Budget Operating budget - Budget for day-to-day expenses. For example, state employees’ salaries and maintenance of state facilities.
3. Capital Budget Capital budget - Budget for major capital, or investment, spending. For example, building a new bridge or building. It is usually financed by the sale of bonds. Balancing State Budgets Unlike the federal government, states have laws that require balanced budgets. Balanced budget - A budget in which revenues are equal to spending. This law applies only to the operating budget, not the capital budget. Where are State Taxes Spent? Spending policies differ from state to state.
4. Education State governments provide financial help to their local governments, which run elementary, middle, and high schools. In 2008, the per student national expenditure average was $11,223, but California ranked 43rd with an average of $8,852 per student. California also has a large state university and community college system. Public Safety The state police force enforces traffic laws along the nation’s highways. The state corrections system houses people convicted of state crimes.
5. Highways and Transportation States build and maintain highway systems which includes resurfacing roads and maintaining bridges. Public Welfare States help pay for some federal programs such as unemployment compensation. States also support some public hospitals and environmental protection agencies. Arts and Recreation State forests, parks, and nature preserves are funded by the state. States also run museums and help fund music and art programs.
6. Administration States have to pay for the salaries of members of the executive branch, legislature, and the court system. State Tax Revenue Sales and personal income taxes provide the largest percentage of state revenue. In 2011, personal income tax comprised 41.3% and sales tax comprised 26.9% of total state revenues in California. Limits on State Taxation State governments cannot tax federal property. For example, military bases. Nonprofit organizations, religious groups, and charities are usually tax exempt. Tax exempt - Not subject to taxes.
7. Sales Tax Sales taxes are a main source of revenue for state governments, but they vary from state to state. Sales taxes are a percentage of the purchase  price and range from 3% to 8%. Some states without sales taxes impose excise (sin) taxes on liquor and cigarettes to discourage harmful behavior. Other taxes apply to hotels, automobiles, rental cars, and gasoline. State Income Taxes State income taxes are another large contributor to many states’ budgets. Some state income taxes are proportional (flat), some are progressive (like the federal government), and some are a percentage of a person’s federal income tax.
8. Corporate Income Tax Corporate income taxes contribute only a small percentage of state revenues. For example, 8.9% in California. Low corporate taxes make it easier to attract new businesses to a state. Other State Taxes States charge people and businesses numerous state fees and license fees. For example, a contractor’s or real estate license. States charge severance taxes on companies that take resources from the state’s land and waters. For example, gold, oil, fish, and lumber. States charge an inheritance tax on the value of the property that goes to each heir. Some states also tax real and personal property. Real property - Physical property such as land or buildings. Personal property- Possessions such as jewelry, furniture, and boats.
9. Local Government Spending and Revenue The local government plays a part of your everyday life by funding: Schools, teachers Police, jails, firefighters Roads, libraries, hospitals The two largest sources of local revenue are from intergovernmental revenue (amounts received from other governments) and property taxes. The largest source of local spending is on public education. Forms of Local Government Local governments include cities, towns, school districts, townships, and counties. They are all created by the state government which gives them their powers and authority.
10. The Jobs of Local Government Local governments have many responsibilities, such as law enforcement, fire protection, public school systems, public health, and social services. Property Taxes Property taxes are levied on property owners in local communities and those taxes are the main source of funding for public education. Tax assessor -An official who determines the value of property for tax purposes. Prop 13 (1978) amended the California Constitution and limited property taxes to 1% of the full cash value of the property. Other Local Taxes Local governments collect sales, income, and a variety of other taxes targeted at visitors to a city.
11. The End