government revenue streams and budget process [very simplified]

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%

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