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Copy of Copy of Am. Gov-Ch.7.3 Notes Financing Government
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American Government
Ch.7.3-Financing Government:
Borrowing money...
Other taxes...
Federal Debt
Government Spending
The total sum of money that the federal government has borrowed and not yet repaid is known as the federal debt.
3.6 Trillion is the current Federal Debt
Government Spending Continued...
Bond- a financial instrument by which a borrower agrees to pay back borrowed money, plus interest at a future date.
Federal Debt- total sum of money that the federal Government has borrowed and has not yet been repaid
Discretionary Spending:
is spending subject to the annual budget process.
Congress can use its own judgement when deciding how to allocate discretionary funds.
Today it makes up 31% of the entire budget.
Mandatory Spending:
is spending required by laws and not subject to the annual budget process.
A large percent of mandatory spending goes to entitlement programs, or government programs that people are entitled to by law-Social Security
Payroll Taxes continued...
excise taxes and tariffs...
Tariffs are taxes on imported goods.
Government is trying to move toward "free trade" trade without tariffs or with reduced tariffs.
Estate tax--This is a tax placed on money and property that is passed on to the heirs of someone who dies.
Fiscal Policy- Create a federal budget by Congress or the President
Monetary Policy- When the Government alters the amount of money in circulation, and adjust intensest rates in which money is borrowed .
Payroll Taxes
The Medicare tax is a proportional tax, or a tax that is applied at the same rate against all income.
This rate does not change according to the amount earned, the Medicare tzx is also a regressive tax.
Paying for Government
Another big source of federal revenue is payroll taxes.
collected to help pay for Social Security, Medicare and other forms of social insurance.
Payroll Tax makes up about 64% of federal revenues.
It is money withheld from a person's paycheck by his or her employer.
Payroll tax is a progressive tax-also known as a tax that has a greater impact on lower income earners than on upper income earners.
Income Taxes:
In 1913 the 16th Amendment gave Congress the power to levy and income tax which is a tax on a person's or corporations income.
Progressive Tax:
A tax whose rates increase as the amount that is subject to taxation increases.
Ex. Those that make a higher salary pay a higher tax.
10% for low salaries to 45% for high salaries
Income tax brings in the highest share of the federal governments revenue.