Includes both spending and transfer payments divided

This preview shows page 8 - 10 out of 13 pages.

includes both spending and transfer payments Divided into three categories: mandatory outlays, discretionary spending, and interest payments Mandatory outlays are the largest portion Mandatory outlays:govt spending that is determined by ongoing programs like Social Security and Medicare; sometimes called entitlement programs Mandatory because existing laws mandate government funding for them Not generally altered during budget process Discretionary outlaws:govt spending that can be altered when the govt is setting its annual budget Includes money for bridges and roads, payments to government workers, and defense spending Interest payments are payments made to current owners of US Treasury bonds Such payments aren’t easy to alter, so they are essentially also mandatory payments Social Security and Medicare oSocial Security:US government-administered retirement funding program oRequires workers to contribute a portion of their earnings into Social Security Trust Fund with the promise that they’ll receive these back upon retirement oThe goal is to guarantee that no US worker retires with no retirement income oSS tax rate is now up to 12.4% or is it 7.65%? oMedicare:a mandated US federal program that funds health care people age 65+ oDemographics People are living longer today than ever before, which means that they draw postretirement benefits for a longer period of time
Those who paid into the programs for any years now are retired and drawing benefits In addition to a normal flow of retirees, the baby boomers are now retiring Workers will retire in record numbers over the next 15-20 yrs Spending and Current Fiscal Issues oThere are many reasons for the increased spending including the following three reasons o1. Increased spending on Social Security and Medicare o2. Defense spending after the terrorist attacks of Sept 11, 2001 o3. Government responses to the Great Recession, beginning with fiscal policy in 2008 How Does the Government Tax? Sources of Tax Revenue oThe two largest sources are the individual income tax and the social insurance tax (SS and Medicare) oBoth are deducted from workers’ paychecks so they are referred to as payroll taxes oThere are taxes on the income of corporations oEstate and gift taxes are levied when property is gifted to others, particularly an inheritance oExcise taxes are taxes on a particular good or commodity, such as cigs or gas oCustoms taxes are taxes on imports Payroll Taxes oSocial Insurance Tax The tax for these two programs amount to 15.3% of a workers pay Typically split in half, with 7.65% paid by the employee and the other half by the employee Ppl who are self-employed pay the full 15.3% (the SS portion of this tax is applicable to the first $118,500 an individual earns oIncome Tax Progressive income tax system:income tax system in which ppl with higher incomes pay a larger portion of their income in taxes than people with lower incomes do. Tax rate climbs with income level Marginal tax rate:

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture