taxes. limitations on taxes may be levied on for public purposes export taxes are prohibited direct...
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TaxesTaxes
Limitations on taxesLimitations on taxes
May be levied on for public purposesExport taxes are prohibitedDirect taxes must be proportional according to a states' populationIndirect taxes must be levied at the same rate throughout the country
Federal Government limitations on Federal Government limitations on statesstates
1) may not tax State or local governments in the exercise of their government duties
2) May tax nongovernmental State and local activities, such as tax on State-sold liquor
Types of revenue-raising taxesTypes of revenue-raising taxes
Individual income taxCorporation income taxSocial insurance taxes (Medicare, unemployment compensation,etc)Excise taxesEstate and gift taxesCustoms duty
Taxing for non-revenue purposesTaxing for non-revenue purposes
Congress levies taxes to regulate activities deemed harmful to the public
This power is limited by the Constitution and by the Supreme Court
Difference between a progressive Difference between a progressive tax and a regressive taxtax and a regressive tax
Progressive taxes are levied according to level of income
while regressive taxes are levied at a flat rate
Nontax RevenuesNontax Revenues
Sources of interest that the government collects as nontax revenues:
1) loans made by some federal agencies
2) canal tolls3) fees for passports4) copyrights5) patents & trademarks
SeigniorageSeigniorage
This is the profit made by the U.S. MintThey can make money for more than its face value
Postal ServicePostal Service
The United States Postal Service is one of the only governmental corporations that generate nontax revenue for the government
Borrowing MoneyBorrowing Money
Reason to borrow money:
1) meet costs of crises2) to finance large projects3) pay for deficit financing
How the government borrows How the government borrows moneymoney
The treasury issues securities to investors
These securities take the form of treasury bills
The government promises to repay them with interest on a certain date
The Public DebtThe Public Debt
Over the past 20 years there has been a trend regarding public debt.
The debt has increased tremendously with no signs of decreasing.
InterestInterest
A fee for borrowing money
Generally a percentage of the amount borrowed
DeficitDeficit
The yearly shortfall between income and spending
When spending is higher than income
SurplusSurplus
The yearly excess between income and spending
When income is higher than spending the public debt is reduced
1998 was the last time there was a surplus
Public DebtPublic Debt
The government's total outstanding indebtedness
Including all the money borrowed and yet repaid
Plus the accrued interest
Debt held by the GovernmentDebt held by the Government
Social Security, civil Service Retirement,
Military Retirement, Medicare, Unemployment
Insurance, Highway and the Airport, the Airway Trust Funds
Spending and the BudgetSpending and the Budget
Controllable SpendingControllable Spending
Meaning: Congress and the President decide how much will be spent on a specific item in the budget
Examples: Military, Education, environmental protection
Uncontrollable spendingUncontrollable spending
Meaning: spending that Congress and the President have no power to change
Examples: Social Security, food stamps, Medicare
SpendingSpending
The President initiates the spending process
This serves as a political statement since it serves as a plan for the execution of public policy (ie where is the government's money going to be spent)
More SpendingMore Spending
The three categories that the government has spent the most money on is:
1) Social Security2) Treasury3) Health and Human
Services
Budget-making processBudget-making process
Begins with each federal agency submitting its spending plans to the OMB (Office of Management and Budgeting)Congress reviews the budget, holds hearings and prepares appropriation bills
EntitlementEntitlement
Any benefit that federal law says must be paid to all those who meet the eligibility requirementsExamples: Medicare, Medicaid, Social Security, OASDI