Transcript Chapter 16 PPT - Ash Grove R

American
Citizenship
Financing Government
Chapter 16 Notes
Section 1
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Taxes
The Power To Tax
Power that was granted to Congress
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“To lay and collect Taxes, Duties, Imposts and
Excises, to pay the Debts and provide for the
common Defense and general Welfare of the
United States…”
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Article 1, Section 8, Clause 1
The Power To Tax (Con’t)
Constitutional Limitations
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Taxes must be used for public purposes only
Prohibition of export taxes
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Can not tax goods sent out of the country
Direct taxes must be equally apportioned, evenly
distributed, among the states
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Any direct tax that Congress levies must be
apportioned among the States according to their
populations
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Income Tax
Indirect taxes levied by the Federal Government
must be set at the same rate in all parts of the
country
The Power To Tax (Con’t)
The Implied Limitation
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Federal Government cannot tax the States or
their local governments, when those
governments are performing social acts
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Public Education, Furnishing Health Care,
Building Streets and Highways
Current Federal Taxes
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Income Tax
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Authorized by the 16th Amendment
A flexible tax that is levied on the earnings of
both individuals and corporations
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Progressive tax used today
 The higher one’s income, the higher percentage of tax
one pays
Current Federal Taxes (Con’t)
The Individual Income Tax
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The Tax is levied on each person’s taxable income
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one’s total income in the previous year less certain
exemptions and deductions
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By April 15 of every year people must file a tax
return
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Deductions are things that help reduce the amount of taxes
one pays
a declaration of that income and of the exemptions
and deductions he or she claims
Controlled by the Internal Revenue Service (IRS)
Most pay income taxes through withholding
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pay-as-you-go plan
Current Federal Taxes (Con’t)
The Corporation Income Tax
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Corporations pay a tax on its net income
Social Insurance Taxes
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Social Security Act of 1935
Medicare
Unemployment Compensation Program
All three are paid through payroll taxes
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Tax that employees pay that are withheld from their
paychecks
They are considered regressive taxes
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taxes levied at a flat rate, without regard to the level
of a taxpayer’s income or their ability to pay them
Current Federal Taxes (Con’t)
Excise Taxes
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Tax laid on the manufacture, sale, or consumption of
goods and/or the performance of services
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Estate and Gift Taxes
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Estate Tax
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A levy imposed on the assets of one who dies
Gift Tax
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levy imposed on the making of a gift by a living person
Custom Duties
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A tax laid on goods brought into the United State from
abroad
Taxing for Nonrevenue Purposes
Taxes can also be used to discourage or
limit purchases or actions
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Hunting license
Firearm sales
Etc.
Section 2
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Nontax Revenues and Borrowing
Nontax Revenues
Most Nontax Revenues comes from
earnings of the Federal Reserve System,
mostly in interest charges
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A charge for borrowed money, generally a
percentage of the amount borrowed
Also made through the minting of coins
and selling of special stamps
Borrowing
Congress has the power “to borrow Money on
the credit of the United States” (Article 1,
Section 8, Clause 2)
Since the 1960’s, America has consistently
borrowed money to pay for the annual deficit
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Since 1969, there was not a surplus, except for
1998-2001
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The yearly shortfall between income and outgo
Mostly due to a robust Economy
Generally the borrowing is done by the Treasury
Department, but Congress must authorize it
The Public Debt
The government’s total outstanding
indebtedness
Due to the high amount borrowed, many
are concerned about the weight the debt
will have on future generations
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In 2003, 1 in 5 every dollar went to interest on
the debt
Current Debt
Section 3
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Spending and the Budget
Federal Spending
Spending Priorities
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SSA spends more money than any other
Federal Agency
Entitlements
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Benefits that federal law says must be paid to all
those who meet the eligibility requirements,
such as being at a certain age or income level
Federal Spending (Con’t)
Controllable and Uncontrollable Spending
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Controllable spending is any spending that
Congress and the President can make choices
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Also known as Discretionary Spending
Uncontrollable spending is any spending that
is mandatory
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An example would be the interest payments
Also, Social Security Benefits, Food Stamps, and
other entitlement programs
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Nearly 80% of spending is considered uncontrollable
Federal Budget
Congress controls the purse strings, however
the President initiates the spending process by
submitting a budget at the beginning of each
congressional session
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It is a major political statement; a declaration of the
public policies of the United States in financial terms
The President and the Budget
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All agencies submit their proposals to the OMB (Office
of Management and Budget), who determines whether
they will be a part of the budget document
Federal Budget (Con’t)
Congress and the Budget
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CBO (Congressional Budget Office) in both
houses reviews the budget proposed by the
OMB
Congress tries to pass the appropriations (Bills)
by October 1 (Beginning of next Fiscal year)
Continuing Resolution
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measure allows the affected agencies to
continue to function on the basis of the previous
year’s appropriations