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Sources of Federal Revenue. By: Alyssa Sargon and Chloe Grimes. Vocabulary. Budget: A policy document allocated burdens (taxes) and benefits (expenditures) Expenditures: Federal spending of revenues Revenues: Financial resources of the federal government

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Sources of federal revenue

Sources of Federal Revenue

By: Alyssa Sargon and Chloe Grimes


  • Budget: A policy document allocated burdens (taxes) and benefits (expenditures)

  • Expenditures: Federal spending of revenues

  • Revenues: Financial resources of the federal government

  • Deficit: An excess of federal expenditures over federal revenues

Sources of federal revenue1
Sources of Federal Revenue

  • Income Tax: Shares of individual wages and corporate revenues collected by the government

    • 16th Amendment: explicitly permitted Congress to levy an income tax

    • The Internal Revenue Service (IRS) was established to collect taxes

    • Corporations and individuals pay income taxes

    • Generally progressive (meaning that those with a more taxable income do not only pay more taxes, but also pay at higher rates)

      • Much controversy arises about whether it should be a flat tax or progressive

Source of federal revenue continued
Source of Federal Revenue (continued)

  • Social Insurance Taxes:

    • Employers and employees pay Social Security taxes

      • This money goes to the Social Security Trust Fund

        • This pays benefits to elderly, disabled, widowed, and unemployed citizens

    • Social Security taxes of revenue have grown faster than any other source of federal revenue

Source of federal revenue continued1
Source of Federal Revenue (continued)

Judge Li

  • Borrowing:

    • Federal government may borrow money to make ends meet

      • The Treasury Department sells bonds

    • Borrowed money is for everyday expenses

    • Federal Debt: All the money borrowed by the federal government over the years and still outstanding.

      • Today it is more than 8 trillion

    • Large deficits make the American government dependent on foreign investors

    • The Federal government does not have a capital budget (a budget for expeditentures on items that will serve long term such as equipment, roads, and buildings)

Taxes and public policy
Taxes and Public Policy

  • Tax Loopholes: presumably a tax break or tax benefit

    • They only apply to a few people

  • Tax Expenditures: Revenue losses that result from special exemptions, exclusions, or deductions on federal tax law

    • One of the most obscure aspects of a generally obscure budgetary process

    • Benefits middle- and upper-income tax payers

  • Tax Reduction: An expense subtracted from adjusted gross income when calculating taxable income

    • Indexing taxes: government no longer received a larger share of income when inflation pushed incomes into higher brackets while tax rates stayed the same

      • Families with high incomes saved lots of money while poorer families saw little change in their tax burden

  • Tax Reform: changing the way people are taxed (i.e. President Reagan wanted to eliminate tax deductions and expenditures)