Federal Budget and Tax Systems

Flashcards covering the U.S. Federal Budget and Tax Systems

Mandatory Spending

Spending required by law, not subject to annual appropriations. Includes Social Security, Medicare, Medicaid, interest on national debt, and other entitlement programs.

Discretionary Spending

Spending set by Congress each fiscal year. Includes defense, education, transportation, environmental protection, and scientific research.

Sources of Federal Government Revenue

Individual income taxes, payroll taxes, corporate income taxes, excise taxes, customs duties and tariffs, estate and gift taxes, and other sources.

Progressive Tax System

Tax rate increases as income increases, so higher earners pay a larger percentage of their income in taxes. Example: U.S. federal income tax.

Regressive Tax System

Lower-income individuals pay a higher percentage of their income compared to higher-income earners. Example: Sales taxes or payroll taxes.