chapter 16 Flashcards
Governments number 1 way to get money
Taxing
Power to tax is to whom and comes from what?
From Constitution and to Congress
type of match that was taxed
white phosphorus
4 limits on power to Tax
- ) Must be for public use, not private
- ) Cannot tax exports, but can prohibit some items
- )Direct taxes must be equally among states
- ) all duties, imposts, and excise taxes must be uniform
implied limits on Tax
Federal government can’t take state and local government in exercise
reasons to tax
raise money needed to operate FED GOV
discourage activity harmful to public
tax that must be borne by the person upon whom it is levied
direct tax
examples of direct taxes
tax on land or buildings
levies that may be shifted to another for payment
indirect tax
made by 16th amendment; largest source of federal revenue; flexible due to government desiring specific amount of money ; put on both people and corporation
income tax
the higher one’s income, the higher the tax rate is; also called income tax
progressive tax
april 15th; to collect taxes
Tax Day
all of earrings above the costs of doing business
net income
most complicated of taxes due to many deductions allowed
corporate income tax
Main 3 social welfare programs collected for money
- ) Old Age, Survivor, and Disability Insurance (OASDI)
- ) Medicare
- )Unemployment compensation
basic Social security program
OASDI
healthcare for the elderly
medicare
benefits paid to jobless workers
unemployment compensation program
imposed on all employees and employers; withheld amount from paycheck
payroll taxes
taxes levied at a fixed rate without regard to the level of a taxpayers income or his or her ability to pay them
regressive taxes
what takes more money than any income tax?
Social insurance– medicare
tax laid on the manufacture, sale, or consumption of goods or services
excise taxes (Hidden tax/sin tax/luxury taxes)
a levy imposed on the assets (the estate) of someone who dies
estate tax
levy imposed on a gift from one living person to another
gift tax
why was gift tax created
to not let people be given money after death
taxes laid on good brought to the USA from abraod
Custom duties ( tariffs or imposts )
a charge for borrowing money and generally the percent amount borrowed
interest
why does gov borrow money?
to pay for deficit or large scale projects and military
spending more than you make
deficit spending
Who authorizes borrowing?
Congress
who does borrowing
treasury department
President Roosevelt’s policy to fight depression; spending a lot to get out of economics trouble
Keynesian Economics
government spending creates jobs
Demand Side Economics
Reduce tax on workers which will give them more money to spend and unemployment down
Reaganomics or Supply Side Economics
What are T Bills
Issued Treasury Department bills that basically request money and then say how much will be repaid
Who invests in US
Citizens, Banks, and Foreign Governments
The total outstanding indebtedness of the Federal Government
Public Debt
Is there a constitutional limit on borrowing
No
What changed the income of gov?
Great Depression and WW2
Spends most money
Department of health and human services
Benefits that federal law says must be paid t all those who meet the eligibility requirements
Entitlements
Largest entitlement program today and recall is funded by the social insurance taxes withheld from the paychecks of American workers
OASDI
Administers OASDI
The social security administration
Congress and president decide what money will be spent on
Controllable spending
Spending that is necessary and the government has to spend money on
Uncontrollable spend
controllable spending examples
highway projects, aid to education, national parks, civil service pay
largest controllable spending
defense
term used to describe spending on those budget items about which congress and the president make choice
discretionary spending
how can congress change uncontrollable spending
passing laws to change them
example of uncontrollable spending
interest, social security benefits, food stamps
how much percent falls into uncontrollable
60%
very significant power to control financing of the federal government and all its operations
power of the purse
who decides how much the government spends
congress
Presidents role in budgetmaking
he submits a budget to congress soon after the yearly sessions
what is the federal budget represent
the presidents work plan for the conduct of the government and the execution of its public policies
when does federal budget begin
last eighteen months before the fiscal year
presidents budget making agency
OMB
what does OMB do
review dollar requests by agencies
what does the CBO
directs and studies requests
staff agency created by congress in 1974; provides congress and committees basic budget and outlines
CBO
committees analyzing budget requests for congress
appropriation committees
where do appropriation committees refer to next
the floor of each house h
a measure that allows agencies to continue working based on the previous years appropriation
continuous resolution
total value in all final goods and services produced each year
GDP
3 goals of economic realm
full employment, price stablitily and economic growth
tracks the prices of consumer goods
consumer price index
effects of inflation
no purchasing power of consumers
effects of deflation
can’t borrow money or pay loans off
when gap increases what also
economy
lack of growth and economy shrinks
recessions
major tool with which the fed gov seeks to achieve its broad economic goal ; power to tax and spend and influence the economy
fiscal policy
government spending means what
hightened economy activity
spending cuts do what
checks activity
tax increases =
Slow economic growth and no spending money
tax cuts =
economy boost
what has gov done in recent years to boost economy
spending more to boost economy
limit on fiscal policy
time
the most significant of those other means by which the federal government can influence the nations economy
monetary policy
responsive for the execution of the governments monetary policy ( central bank )
federal reserve board
when depositors lose confidence in banks and rush to recover their funds ( feds created to prevent this )
panic
tools of the feds
open market operations, reserve requirements, discount rate
a process that involves buying or selling of government securities from and to nation banks ( money makes loans 0
open market OP
goal of open market OP
decrease money supply or slow down
the amount of money that the federal reserve board determines banks must keep in reserve in their vaults in one of 12 banks
reserve requirements
aim for reserve require
sudden quick demand or lower money supply buy adding more to reserve
the rate of interest a bank must pay when it borrows money from a federal reserve bank
discount rate
effect of upping discount rate
banks can’t obtain money easily; higher interest rates and less money flow
