Federal, State, and Local Taxes & Spending

Chapter 14 Section 3 & 4 Federal, State, and Local Taxes & Spending

There are two types of government spending. 1. Discretionary- Spending that lawmakers are free to make choices about. 2. Mandatory- Spending that Congress is required by existing law to do.

The Federal Government spends the revenue it collects from taxes and other sources on a variety of programs. -Look at figure 14.4 on pg. 375

Chart for Federal Source of Revenue and Spending Source of Federal Revenue: -Individual Income Tax -Corporate Income Tax -FICA -Excise -Estate -Gift -Import -Bonds -Fines, etc.

3. Entitlement Programs- Social Program that people are "entitled to" benefit from if they meet certain eligibility requirements. -Most of the mandatory items are for entitlement programs -Entitlements are a largely unchanging part of government spending. *Congress can only change the eligibility requirements or reduce benefits if there is a change in the law.

Chart for Federal Source of Revenue and Spending Where money is spent: 1. Entitlement Programs (5)- -Social Security -Medicare -Medicaid -Food Stamps -Federal Pensions -Vet Pensions -Unemployment Insurance

Social Security -Huge portion of federal spending -About 50 million Americans currently receive monthly payments. -In danger due to baby boomers and shrinking work force.

Medicare -Biggest entitlement spending category -About 42 million people receive these benefits for the costs of medical services, physicians, and hospital care. -Medicare costs have been rising due to newer more expensive technologies and people living longer. -Faces same problem as social security -Taxes for this set to go up with fiscal cliff -Part of reason why Affordable Health Care Bill was passed.

Medicaid -Helps low income families pay for their medical expenses -The Federal Government shares the cost of this with state governments.

Other Mandatory Spending -Other means tested entitlements benefit people whose incomes fall below certain levels and include: -Food Stamps and child nutrition programs -Retirement benefits and insurance for federal workers -Veterans' Pensions -Unemployment insurance

-In recent years, there has been lively debate over governmentally funded universal healthcare. (Obamacare)

Chart for Federal Source of Revenue and Spending Where money is spent: 2. Discretionary Spending (5) -Defense -Education -Scientific Research -Student Loans -Law Enforcement -Environmental Cleanup -Disaster Relief -Federal Employees Salaries

Discretionary Spending Defense Spending -Accounts for about half of the governments discretionary spending. -Pays for soldiers salaries, weapons, etc.

Chart for Federal Source of Revenue and Spending Where money is spent: 3. Federal Aid to state and local governments -Medicaid -Unemployment Compensation -Disaster Relief -Highway Construction -Education -Low income housing -Mass transit -Healthcare, -Employment training

Federal taxes are sometimes used to help state and local governments. -State and local governments share the cost of many of the previous programs.

State Budgets -Governments plan their spending by creating a budget. -The federal government has one budget while state governments have two budgets. 4. Operating Budget: A budget for day-to-day spending needs. 5. Capital Budget: A budget for spending on major investments. 6. Balanced Budget: A budget in which revenue and spending are equal.

-Unlike the federal government, 49 states require balanced budgets, budgets in which revenues are equal to spending.

State Tax Revenue Chart for State Source of Revenue: -Sales Tax -Excise Tax -State Income Tax -Corporate Income Tax -Licensing Fees -Transfer Fees -Inheritance Tax -Property Tax

Chart for States Where is money spent? Education -Every state spends taxpayer money to support at least one public state university. -They also provide financial help to local governments for public elementary and secondary schools.

Public Safety -State police enforce traffic laws and help motorists in an emergency. -State governments build and run correction systems

Public Welfare -State funds help hospitals and clinics and unemployment benefits. Highway and Transportation -State crews resurface roads and repair bridges. -States pay some of the cost of facilities like waterways and airports.

Arts and Recreation -States fund parks, nature reserves, museums, and art and music programs.

Administration -State governments spend money to keep the government running -Revenues pay for state worker's salaries.

Local Governments Chart for Local Tax Source of Revenue -Income -Excise -Property -Sales -School- Makes up the largest part of local taxes American's pay.

-Many local taxes are designed to raise revenue from nonresidents.

Chart for Local Taxes Where is the money spent? -Local governments, including towns, cities, counties, and school districts, carry major responsibilities in the public school systems, law enforcement, and fire protection. -They also manage public facilities, parks, and recreation facilities. -They monitor public health, transportation, elections, record keeping, and social services.