Taxes and Spending

1. Taxes and Spending

2. The National Budget • Federal government keeps track of how money is spent over a period of time using a budget… • called the national budget.

3. Money Available = Revenue

4. Budgets • A budget is balanced when revenues equal expenditures. • Deficit = spend more money than you make • Government spends more money than they have…they must borrow to spend = deficit spending • Surplus = money left over after all expenses are paid

5. Fiscal Policy • Policy about spending and taxation • Based on deficit and surplus

6. Where does the government’s money go? • Defense • FBI: investigate federal crimes (Dept. of Justice) • DEA: stop illegal drugs from entering the U.S. • ATF: enforce federal laws dealing with alcohol, tobacco, firearms, explosives and arson

7. Where does the government’s money go? • Entitlement programs (provide individuals with financial benefits) • Dept. of Health and Human Services • Protect the health and safety of Americans and provide human services

8. Dept of Health & Human Services Agencies • CDC-protect nation’s health and conduct medical research • Medicare-look after the health of elderly Americans or those with special situations (65+) • Medicaid- look after health of low-income citizens • Social Security- provides monthly benefits to retired and disabled workers (65 +)

9. Department of Transportation • Set regulations for all public carriers • Planes, trains, automobiles, highways, ferry systems • National Transportation Safety Board (NTSB) • Ensure transportation system meets acceptable safety standards

10. National Security • CIA-deal with threats from foreign countries • Dept. of Homeland Security- fight terrorism • Patriot Act • FEMA: assist with disaster relief • U.S. Citizenship and Immigration Services • Control immigration and naturalization (process by which aliens become citizens)

11. To spend money… the government must have money. How does the government make money?

12. Sources of Revenue • Taxes • Income tax: takes a % of person’s/ company’s earned income • Determined by tax return(filed annually to show earnings and deductions) • Progressive taxation- higher a person’s earnings, the higher the rate of taxation • Regressive taxation- higher rate of taxation the poorer a person is • Proportional taxation- all taxpayers pay the same % no matter their income

13. Excise tax- charged on the production and consumption of particular goods and services (ex. telephone and gasoline) • Estate tax – paid on the transfer of property through inheritance • Property is not taxed • Corporate tax- levied on a company’s earnings and its payroll

14. Other sources of revenue • Tariffs- paid on imports • Fines- penalties levied against individuals (ex. Pollution) • Government bonds- government-issued certificates purchased by an individual or corporation • Allows gov’ts to borrow money on the promise to repay