1. 1. The Federal Budget
2. Fiscal policy
3. State and local finance
2. The Federal Budget:
Revenue and Expenditures
Revenue: money coming in
[assets]
How much?
From what sources?
Expenditures: money spent
[commitments; liabilities]
How much?
On what?
Revenue + Expenditures =
Fiscal Policy
3. Revenue: taxes and other income
What’s the biggest source of
federal revenue? [16th
amendment]
What’s next?
payroll taxes = Social Security,
Medicare/Medicaid withholding
Corporations are like people [law
and taxes]
Other includes:
excise taxes [use tax; e.g. tires]
various duties and fees [e.g.
passport fee]
2010 revenues = $4.5 trillion
2010 deficit [spending over
revenue] = $1.5 trillion
overall public debt = ?
≅ 45%≅ 35%
≅ 15%
≅ 7%
4.
5. State and local revenue
Note the differences from
federal sources by type and
amount
Revenue from federal
government often used to
fund entitlement and
highway construction, etc.
Property taxes [on homes,
vehicles, etc.] often used to
fund capitalization [building]
projects like schools, water
treatment, etc.
%s can vary state-to-state.
E.g. For some
intergovernmental revenue
is largest.
≅ 23%
≅ 26%
≅ 20%
≅ 19%
≅ 23%
≅ 4%
E.g. Alaska, Delaware,
Montana, New Hampshire
and Oregon do not have
state sales tax.
6. types of taxes
Progressive [tax brackets]
Income taxes are progressive
Brackets within brackets [$50 increments
Regressive [flat tax]
7. Types of spending commitments
Mandatory spendingMandatory spending
Mostly entitlement programsMostly entitlement programs
Makes up most of the budgetMakes up most of the budget
Discretionary spendingDiscretionary spending
All other expensesAll other expenses
Require annual approvalRequire annual approval
Relatively small part of the budgetRelatively small part of the budget
8. The federal budget processThe federal budget process
President proposesPresident proposes
Dept’s and agencies stateDept’s and agencies state
needsneeds
OMB crafts budget based onOMB crafts budget based on
Prez’s priorities and its ownPrez’s priorities and its own
fiscal projectionsfiscal projections