gov’t growth not inherent in Presidency, unlike Congress•Americans are both ideologically conservative and operationally liberal•tend to elect President who reflects ideology•tend to elect Congress consistent w/ appetite for public serviceChapter 13: The Budget: The Politics of Taxing and SpendingTerms of Reference•budget - policy document allocating burdens (taxes) and benefits (expenditures)•deficit - expenditures exceed revenues in a fiscal year; national gov’t spends more money than it receives in taxes•debt - sum of all deficits across all years•interest - premium paid regularly to lenders for privilege of using their moneyXIV.Federal Revenue and Borrowing•3 major sources of federal revenue - personal income taxes, corporate income taxes, and social insurance taxesA.Personal and Corporate Income Tax•income tax - required to pay gov’t portion of money earned•first 100+ years of nation - fees collected on imported goods financed most of federal gov’t•first income tax in 1984 found unconstitutional•Sixteenth Amendment - explicitly permits Congress to levy income tax•Internal Revenue Service (IRS) - est. to collect income tax; 140+ million individual tax returns each year•income tax generally progressive - those w/ more taxable income pay more taxes at higher rates•rates range from 10-35%•income tax NOT same as payroll tax•42% paid no taxes - below income level where tax is due; affected by tax credits and other programs•1% of taxpayers pay 37% of taxes•top 10% paid 70%•bottom 50% paid 2%•tax reform - how? no agreement•close loopholes, restore fairness, flat tax optionB.Social Insurance Taxes•paid by both employers and employees•funded by flat-rate payroll tax + matching employer contributions•money deducted from paychecks and matched by employers•Employees 7.65% + Employers 7.65%•Self-employed - 15.3%•capped so Americans w/ income < $113K pay proportionally more than wealthy•fasted growing source of federal revenue - due to cuts in income taxes and incr.costs•1957 - 12% of federal revenues
POLS 206 - Roblyer•today - 1/3 total federal revenueC.Borrowing•tax revenue doesn’t cover federal gov’t expenditures•Treasury Department sells bonds - guarantees interest to bondholders•intragovernmental debt - what Treasury owes Social Security and other trust funds because gov’t used revenue from social insurance taxes•most gov’t borrowing not used for capital needs - used for day-to-day expenses•national debt = $17.5 trillion•6% of federal expenditures goes to pay interest on national debt•borrowing money shifts burden to future generations/taxpayers•paying interest not option - money for interest is money lost to US•spending incr. when revenue declines due to bad economy - greater need for social safety net•foreign investors hold majority of public debt•need to borrow creates issue for Congress•debt ceiling - limit on how much gov’t may borrow•if Congress must incr. debt ceiling, creates opportunity for opposing party to
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- Spring '06
- President of the United States, United States Congress