Quick overview of finances

or how to get yer money !!

The Federal Government’s IncomeFederal revenue comes from several different

sources:

Chapter 16, Section 1Chapter 16, Section 122 33

Current Federal Taxes

Chapter 16, Section 1Chapter 16, Section 122 33

Individual Income Tax• Individual income taxes

regularly provide the largest source of federal revenue.

• The tax is levied on each person’s taxable income.

Corporation Income Tax• Each corporation must pay

a tax on its net income, that is, on the earnings above the costs of doing business.

The Income Tax• The income tax is the largest source of federal revenue

today. The tax is also a progressive tax, that is, the higher the income and the ability to pay, the higher the tax rate.

Chapter 16, Section 2Chapter 16, Section 23311

Nontax Revenues and Borrowing

Nontax Revenues• Nontax revenues come from a variety of sources,

including canal tolls; fees for passports, copyrights, and patents; interest earned; and selling stamps.

Borrowing• Congress has the power “[t]o borrow Money on the

credit of the United States.” (Article I, Section 8, Clause 2).

• A deficit is the shortfall between income and spending.

• A surplus is more income than spending.• Congress must authorize all federal borrowing.

Chapter 16, Section 2Chapter 16, Section 23311

The Public Debt The public debt is the government’s total outstanding

indebtedness. It includes all of the money borrowed and not yet

repaid, plus the accrued, or accumulated, interest.

Creating the Federal Budget

Chapter 16, Section 3Chapter 16, Section 32211

Who makes those decisions?• Fragmented – remember decentralized gov!!

• Council of Economic Advisors – a group of professional economists

• OMB

• Secretary of the Treasury – estimates the governments spending

• The Federal Reserve Board – (The Fed) – regulated the supply and price of money, sets interest rates and controls inflation (or not)

Terms to remember…• Pork barrel – tangible benefits to gain votes

• Political agenda – issues that people believe require government action

• Cost – the burden people believe they must pay

• Benefit – satisfaction as a result of cost

• Majoritarian policies – a policy that benefits almost everyone and almost everyone pays

• Client politics – a small group benefits but almost everyone pays (farmers, airlines)

• Interest politics – a small group benefits and another small group pays (banks, insurance)