Post on 25-Dec-2015
Government FinancesChapter 25
The Federal GovernmentChapter 25 Section 1
Words to Know
Budget: A plan for making and spending money
Fiscal Year (FY): 12-month planning period that may not coincide with the calendar year
Budget Resolution: Congressional document that shows total spending and revenues for a year and how much it will be spent in various categories
Mandatory Spending: Federal spending required by law that continues without the need for annual approvals by Congress
Discretionary Spending: Spending for federal programs that must receive annual approval
Words to Know
Appropriations Bill: Legislation earmarking funds for certain purposes
Tax Return: Annual report filed with local, state, or federal govt. detailing income earned and taxes owed
Payroll Tax: Tax on wages and salaries to finance Social Security and Medicare costs
Social Security: Federal programs that provide monthly payments to people who are retired or unable to work
Medicare: Govt. program that provides health care for the aged
Preparing the Budget
Federal govt. spends a huge amount of money
Budget created yearly: Pres. and Congress
create it
Govt. uses Fiscal Year: Oct. 1st-Sept. 30th
Budget starting on 10/1/05 is the fiscal year 2006 budget
The Budget Process
Law= Pres. must propose budget to Congress by 1st Monday in Feb.: Pres. outlines where govt. should spend money
Congress then passes Budget Resolution: Spending divided into 2 categories:
Mandatory Discretionary
The Budget Process cont.
Mandatory Spending: Examples:
Social Security Benefit Checks
Interest payments on govt. debt.; Must be paid yearly
Discretionary Spending: Examples:
Coast Guard Agriculture Space Exploration Highway Construction Defense
Makes up about one-third of Fed. Budget
Appropriations Bill
Before Govt. can spend money, Congress must pass appropriations bill: Congress splits
discret. spend. Into 13 separate appropriations bills Bills go through
normal bill process Each bill must be
approved by both houses
Pres. Signs or vetoes
Federal Revenues
Federal Budget has 2 main parts: Revenues Expenditures
Pg. 544 chart Left side Federal Revenues
Taxes on Incomes and Profits
Income tax supplies nearly ½ of Fed. Govt. revenue
Portion of people’s paychecks withheld
End of year: Workers file tax return
Paid too much tax=return Paid too little tax=owes
Corporations pay income tax on earned profits: 10% of federal revenue
Payroll Taxes
2nd largest source of Federal Income: Payroll Taxes:
1/3rd
Social Security
Medicare
Other Revenues
Excise Tax on purchases: Gasoline Tobacco Alcohol Legal betting Telephone service
3.4 cents of every dollar collected
Wealthy people die: Govt. collects estate tax
on wealth passed to heirs
Other Revenues cont.
Govt. charges tax on certain gifts
Gift tax and estate tax make-up 1.3 cents of every fed. revenue dollar
Misc. sources account for 2% of fed. revenue: National Park entry fee Fees paid by oil
companies Drill on public land
Forms of Taxation
Proportional Tax: Takes same % of income from everyone
Regardless of how much one makes
Progressive Tax: Tax rate increases as your income increases Higher the income, higher the tax
Forms of Taxation cont.
Regressive Tax: Opposite of progressive tax % taxed goes down the more money you make
Example: Poorer families spend larger proportion of income
buying gasoline Sales tax they pay on gasoline takes up larger
proportion of their total income
Federal Expenditures
Pg. 544 chart Right side Expenditures
SS, Medicare, Income Security, Health
Social Security (SS): Largest spending
category 21.2 cents of every
fed. dollar spent in `06
More older people expense grows
Medicare costs will rise as population ages: 4th largest category
SS, Medicare, Income Security, Health cont.
Income Security: Retirement benefits:
People who worked in govt.
Served in military Retirement payments
to railroad workers Disabled coal miners Payments to poorer
Americans for housing and child nutrition
SS, Medicare, Income Security, Health cont.
Health: Payments for
Medicaid: Health care for low
incomes Spending on research
to find cures for diseases
National Defense
2nd largest category of fed. spending: 2001= 16.4 cents of
every Fed. dollar spent: Change because of
wars
Interest on Debt.
Portion goes to pay interest on money the govt. has borrowed
Amount depends on how much has been borrowed Interest rate %
7th largest expenditure
Other Expenditures
Money spent on education, highways, natural resources: Billions of dollars of
spending
HomeworkChapter 25 Section 1 Worksheets