The Federal Budget

Source of Federal Revenues

- 16th amendment creates the individuals income tax as a progressive tax where higher income earners are taxed at a higher percentage. - The individual income tax represents roughly 46% of federal tax revenues. - Corporations pay corporate taxes ranging from 15% to 35% of their income - Corporate income taxes accounts for around 12% of federal tax revenues.

A balanced Budget?

- A balanced budget is when the government's spending equals its tax revenues for the fiscal year. - A budget deficit is when government spending exceed tax revenues. - A budget surplus is when government spending is less that tax revenues.

Types of Taxes

- A progressive tax is proportionate to income. As a taxpayer's income increase, so does the tax rate. - A regressive tax is levied at a flat rate without regard to the level of a taxpayer's income or ability to pay--- therefore, poor citizens pay a higher percentage than wealthier citizen.

The national Debt

- Budget deficits meaning the federal government must borrow money. - Every year of budget deficit contributes to the national debt. - Almost 10% of federal expenditures go towards paying interest on the national debt.

Congressional Budget and Impoundment Control Act

- Creates a fixed budget calendar to better guide the budget process. - Establishes the congressional budget office to advise congress on the budget. - Balances the roles of the executive and legislative branches for the budget process.

fiscal policy

- Fiscal policy is controlled directly by congress and the president through the budget process. - Fiscal policy involves government's efforts to help the economy by raising/lowering taxes and government spending programs.

Monetary Policy

- Monetary policy is controlled by the federal reserve. - Monetary policy represents government's efforts to help the economy by regulating the money supply, controlling inflation, and adjusting interest rates.

social security

- Passed by FDR in 1935 as part of the new Deal during the great depression. - Programs provide living expresses for retired Americans. - Funded by a 6% tax on all earned income. - Along with Medicare, social security makes up 44% of federal expenditures.

Federal Expenditures

- Uncontrollable spending refers to programs where congress and the president have no control over expenditures (60% of the budget). - These include entitlement programs such as Social Security, Medicare, or programs for veterans. - Discretionary spending programs are not required by law (40% of the budget). - These military are programs such as military defense, education, research, and other government operations.

The Budget Process

1. president works with office of management and budget to submit a proposed budget to congress. 2. senate and house appropriations committees hold hearings. 3. congress works to pass a budget resolution & 12 appropriation bills by October 1st for the start of the fiscal year.