chapter 13 - politics of taxing of spending

Budget

A policy document that allocates burdens (taxes) and benefits (expenditures)

Three major sources of federal revenue

Personal income taxes, corporate taxes, social insurance taxes

Income tax

A tax where individuals pay a portion of their earnings to the government

16th Amendment

Allows Congress to levy an income tax

Progressive tax

A tax where higher income individuals pay higher rates

Flat tax

A tax where everyone pays the same rate

Social insurance taxes

Taxes deducted from paychecks to fund benefits like Social Security and unemployment

Deficit

When government expenditures exceed revenues in a fiscal year

National debt

Total accumulated borrowing by the federal government

Debt ceiling

The legal limit on how much the federal government can borrow

Tax expenditures

Revenue losses due to tax exemptions, deductions, or credits

American Opportunity Credit

A tax credit up to $2500 for first 4 years of college

Lifetime Learning Credit

A credit of 20% of first $10,000 in tuition (max $2000)

Capital budget

Budget for long-term investments like infrastructure

Incrementalism

This year’s budget is last year’s budget plus a little more

Uncontrollable expenditures

Spending required by law for eligible recipients

Entitlements

Government programs guaranteeing benefits (e.g., Social Security)

Social Security Act

Provides income support to older Americans

Medicare

Provides healthcare coverage for older adults

Income security expenditures

Policies that provide aid to elderly, poor, and needy individuals

Congressional Budget Office (CBO)

Advises Congress on budget decisions and forecasts

Office of Management and Budget (OMB)

Assists the president in preparing the budget

Budget resolution

Sets total spending levels for Congress

Budget reconciliation

Process to adjust laws to meet budget goals

Authorization bill

Law that establishes or modifies a government program

Appropriations bill

Law that provides funding for programs

Continuing resolutions

Allow government to operate at previous funding levels

National security state

Growth of permanent military after WWII

Defense spending

Money spent on military, technology, and defense operations

Social service state

Government expansion into welfare and public assistance programs

Tax cuts

Reduce taxes to stimulate the economy but increase deficit

GDP (Gross Domestic Product)

Total value of goods and services produced

Intergovernmental bonds

Debt owed to government trust funds like Social Security

Interest groups

Organizations that influence budget decisions

House Ways and Means Committee

Writes tax laws in the House

Senate Finance Committee

Writes tax laws in the Senate

Government Accountability Office (GAO)

Oversees government spending and accountability

Budget and Accounting Act

Required the president to propose a budget