Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Government Finances Chapter 25 The Federal Government Section 1 Preparing the Budget • Budget= the blueprint for how the government will raise and spend money. • The government uses a fiscal year (FY), a 12-month period that may or may not match the calendar year. – Federal government budget year begging October 1 and ends on September 30 the following year and must be renewed at that time. The Budget Process • By the first Monday is February, the president proposes a budget to Congress outlining how the government should spend its money. • Congress then passes a budget resolution. – This document totals revenues and spending for the year and sets targets for how much will be spent in various categories. Federal Budget Two types of Spending • Mandatory Spending= Spending that does not need annual approval. – Social Security Checks – Interest payments on government debt Two Types of Spending • Discretionary Spending= Government expenditures that must be approved each year. – Money for highway construction and defense. – Makes up 1/3 (33%) of the Federal budget. Appropriations Bills • These are laws that approve spending for a particular activity. • Appropriations bills always begin in the House of Representatives • Must be approved by both houses and either signed into law or vetoed by the President. Revenues • Nearly ½ of the Federal government’s revenue comes from the income tax paid by individual Americans. • Payroll taxes are the second largest source of Federal income. – Social Security—provides money to people who are retired or disabled. – Medicare—pays some health care costs of elderly people. Other Sources of Revenues • Excise tax when you purchase gasoline, tobacco, and telephone services. • When wealthy people die, the federal government collects estate taxes on the wealth passes on to their heirs. Progressive Tax • The tax rate increases as income increases. • The higher the income. The larger the percentage of income is paid as taxes. Regressive Tax • The percentage you pay goes down as you make more money. Proportional Tax • Takes the same percentage of income from everyone, regardless of how much he or she earns. • Ex: Tax rate of 10% on all incomes. Federal Expenditures 1. Social Security -Large elderly population 3. Income Security -Retirement benefits for retired government workers. Defense • National Defense is the second largest federal expenditure. • $ 0.17 cents for every federal dollar is spent on defense. • In times of war defense spending increases. How the Budget process has changed • George Washington was able to put all figures for the national government expenditures on a single sheet of paper. • Today the federal budget consists of more than 1,000 pages of small type. Presidents Role • The Budget and Accounting Act of 1921 changes the Presidents role. • He must submit a budget to congress 15 days after congress convenes each January. State and Local Governments Section 2 State Government Revenues • Intergovernmental Revenues= this revenue is money that one level of government receives from another level. – Most of this comes from the Federal Government. – Used for welfare, highway construction, hospitals, and other needs. State government Revenues • Sales Tax= is a general tax levied on consumer purchases of nearly all products. • The tax is a percentage of the purchase price, which is added to the final price the consumer pays. State Government revenues • Income Tax • Contributions—retirement plans – Invested until it is needed to pay retirement benefits. Local Government Revenues • Property Taxes= Taxes people pay on land and houses they own. – Real Property—lands and buildings – Personal property—portable objects or things that can be moved. Local Government Revenue • Revenue from water and utility systems, sales taxes, local income taxes, and fines and fees. State Government Expenditures • Entitlement Programs—health, nutritional, or income payments to people who meet established eligibility requirements. • States subsidize, or pay part of the cost of, their citizens college education. • Maintain state highways Local Government Expenditures • Education – Public Schools and teachers • Police and Fire Protection • Water supply • Sewage and Sanitation Managing the Economy Section 3 Surplus and Deficits • Surplus= when a government spends less than it collects. • Deficit= when a government spend more than it collects in revenues. From Deficit to the Debt • When the Federal government runs a deficit, it must borrow money so it can pay its bills. • Sells bonds=a contract to repay the borrowed money with interest at a specific time in the future. Debt • All the money that has been borrowed over the years and has not yet been paid back is the government’s debt or the national debt. • In October 2006 the national debt was $4.9 Trillion – $16,365 for every person in America. A Balanced Budget • Expenditures = Revenues • The Federal government is not required to have a balanced budget but many states are. Impact of the National Debt • The national debts most direct impact on the federal government is the amount of tax money needed each year to finance past borrowing. • Every year the interest on the national debt must be paid. • The larger the debt, the more taxes needed to pay this interest. Interest Rate • When the federal government borrows money, it leaves less for citizens and private businesses to borrow. • As government borrowing increases, the interest rate rises. Fiscal Policy • Many people want lower taxes regardless of the state of the economy. • Many people also want government services. • So the Federal government has a hard time cutting spending even when the economy is strong. Automatic Stabilizers • Programs that begin working to stimulate the economy as soon as they are needed. • The main advantage of automatic stabilizers is that these programs are already in place and do not need further government action to begin. Examples of Automatic stabilizers • Income Tax – Progressive tax • Unemployment Benefits – Help give people money until they can find a job