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The Federal Budget
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  1. The Federal Budget

  2. All you have to do is die and…. • What do you already know about taxes? • What does the constitution say about taxes? • Congress had the power to collect taxes to run the government, to pay for the common defense, and to pay off the national debt. There are a few federal taxes that are levied for the welfare of the people. • Taxes must be constitutional. For example, the government cannot tax churches because of the 1st Amendment right to freedom of religion. • What limits on taxation are clearly defined in the Constitution? • Taxes must be for the public good; they cannot benefit an individual or private interest group. • Congress cannot tax exports. • Direct taxes (income taxes) must be apportioned among the states according to their populations. • Indirect taxes must be set at the same rate throughout the country. • What are the implied limitations of taxes? • The federal government cannot tax state and local governments for excising their government duties. A tax on education or infrastructure is not allowed; however, the federal government can tax state and local enterprises, such as liquor sales.

  3. Current Federal Taxes • What are some current federal taxes? • The Income Tax • The Individual Income Tax • The Corporate Income Tax • Social Insurance Taxes • Social Security • Medicare • Unemployment Insurance • Excise Tax • Estate and Gift Taxes • Customs duties What taxes are levied for nonrevenue purposes? The purpose of these taxes is to regulate or discourage use.

  4. Interest, Borrowing and Debt • Nontax Revenues • What are some ways the government makes money without raising taxes? • Borrowing • Why does the federal government borrow money? • To manage short-term (and sometimes long-term) crisis situations. • To finance large-scale projects that could not be paid with current income. • Why else do we borrow? What is deficit spending? • The Public Debt (anyone know about the debt clock?)

  5. The Federal Budget • What are entitlements? • The government provides many benefits to the American people: social security, medicare, medicade, foodstamps, uemployment compensation, veterans’ pensions and benefits, etc. This is mandatory spending! • What is controllable spending? • This is sometimes called discretionary spending, and it includes items that can be added or cut from the federal budget. • What is uncontrollable spending? • This is sometimes called mandatory spending, and it includes interest payments on the debt and payments for entitlements. • Who makes the federal budget? (Be a budget hero!!!)