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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

vocabulary
Vocabulary
  • 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)
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