Fiscal Policy• Fiscal Policy – government policy toward taxing &

spending.Federal Budget

• Prepared annually by the President• Approved by Congress • Budget Year – October 1 – September 30

Government Spending• Mandatory Spending – does not need annual approval.• Discretionary Spending – needs annual approval.

Types of Taxation• Progressive Tax – tax that takes a larger percentage

from the wealthy• Regressive Tax – tax that takes a larger percentage

from lower incomes• Proportional Tax – tax that takes the same percentage

from all incomes.

GOVERNMENT BUDGET

Government Revenue - $ that government has to operate. Taxes, fines, user fees, etc…

Government Expenditures - $ the government must spend on programs it operates.

Balanced Budget – Revenue = Expenditures

Budget Surplus - Revenue > Expenditures

Budget Deficit - Revenue < Expenditures

National Debt – Accumulation of Budget Deficits

Federal Government Revenue

Federal TaxesIncome Tax - #1 source of government revenue.

Progressive tax on individual earning.

Payroll Tax – 2nd largest source of income

Corporate Income Tax – up to 36% of profits.

OTHER FEDERAL TAXESExcise TaxEstate TaxLuxury Tax

Social Security Tax

Federal Government Expenditure

Social Security – 21.2%National Defense – 17.4 %

Income Security – 14%Medicare – 13.5 %

Health – 10.5%Interest on Debt – 8.2%

Other – 15.2 %

State Government

• Intergovernmental Revenue - $ paid from one level of government to another. States get it from the federal government.

• Sales Tax – Paid by retail stores to the state government. (passed onto consumers)

• Income Tax – taken from workers paychecks.

• Excise Tax – Alcohol, tobacco, & gasoline.

Local GovernmentREVENUE

•Intergovernmental Revenue – paid by the state government to local governments.

• Property Tax – paid on land, houses, automobiles, etc…

EXPENDITURESEducation

Police & Fire ProtectionWater Supply

Sewage & Sanitation

FEDERAL INCOME TAX TABLE

TAX RATE SINGLE MARRIED

10% $0-$8,025 $0-$16,050

15% $8,025-$32,550 $16,050-$65,100

25% $32,550-$78,850 $65,100-$131,450

28% $78,850-$164,550 $131,450-$200,300

33% $164,550-$357,700

$200,300-$357,700

35% Over $357,700 Over $357,700