fiscal policy government use of taxes and spending government revenue and expenditure
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Fiscal Policy
• Government use of taxes and spending
• Government revenue and expenditure
Budget Terms
• Expenditure versus Revenue
• Deficit / Balanced Budget / Surplus
• Debt
• Mandatory versus Discretionary
By the Numbers• 2014 Expenditure = 3.5 trillion
– 3,504,000,000,000
• 2014 Revenue = 3 trillion– 3,021,000,000,000
• 2014 Deficit = 483 billion– 483,000,000,000
• National Debt = 18 trillion
Income Tax
• PROGRESSIVE Tax– Higher incomes are taxed at a higher rate
Tax Revision Ideas
• Progressive Tax with limits on deductions
• Flat Tax with no/few deductions
• “Fair Tax”
Tax Revision
• Obama- “Buffet Rule”– Minimum Federal Rate of 30% on incomes
over 1 million/year
– Ave. America= 16%
– Millionaires = 20.1%
Payroll Taxes• Employee-taken directly from paycheck• Employer- paid based on wages paid out
• Examples:– Social Security (employer match)– Medicare (employer match)– Unemployment tax (employer only)
Customs Duties (Tariffs)
• Tax on imported goods• 0-20%• Average 3% (1% with FT)• Free-Trade (20 Countries)
Australia Bahrain Canada Chile ColombiaCosta Rica Dominican Republic El SalvadorGuatemala Honduras Israel Jordan Korea MexicoMorocco Nicaragua Oman Panama Peru Singapore
Federal Excise Tax
• Fuel ($0.184 per gallon)
• Tobacco ($1.01 per pack)
• Alcohol
• Air Travel
General Fund Excise taxes
Cigarettes $1.01 pkg 20
Cigars $0.40 ea. cigar
Distilled Alcohol 80 proof $2.14 750 ml
Wine 14% Alcohol or Less $0.21 750 ml
Wine 14 to 21% $0.31 750 ml
Wine 21 to 24% $0.62 750 ml
Wine Sparkling $0.67 750 ml
Wine Carbonated $0.65 750 ml
Hard Cider $0.04 750 ml
Beer $0.05 12 oz
Pistols and Revolvers 10% price
Other Firearms and Ammunition 11% price
Tanning Salon 10% price
Gas guzzler 21.5-22.5 mpg $1,000.00 vehicle
Gas guzzler 12.5-13.5 mpg $6,400.00 vehicle
Telephone Calls 3% local
Estate (Death Tax)
• Estates over $5,250,000 • Top % of 40%
By the Numbers• 2014 Expenditure = 3.5 trillion
– 3,504,000,000,000
• 2014 Revenue = 3 trillion– 3,021,000,000,000
• 2014 Deficit = 483 billion– 483,000,000,000
• National Debt = 18 trillion
State Revenue
State Budget
• Top Revenue Sources – 3.07% income tax– 6% sales tax
• Top Expenditure- Education
Adam Smith • “An Inquiry into the Nature and Causes of
the Wealth of Nations” • aka “The Wealth of Nations”• “Invisible Hand”• Laissez-Faire
Demand-side EconomicsJohn Maynard Keynes
WPA
WPA
Supply-side Economics
• Aka “trickle-down”• Reaganomics
Sides Game
Revenue EXCEEDS EXPENDITURE
Current Debt
• 15 trillion• 16 trillion• 17 trillion• 18 trillion
Sum of All Deficits and Surpluses
Supply-side
• Funny nickname
Spending that Requires Annual Congressional Approval
Revenue EQUALS Expenditure
Mandatory or Discretionary
• Largest % of Federal BUdget
Largest Mandatory Spending
Expenditure EXCEEDS Revenue
Largest Discretionary Spending
2013 Deficit
2014 Revenue
• 1.45 trillion• 3 trillion• 3.5 trillion• 6.2 trillion
PL measurement
Automatic Spending
2014 Expenditure
• 1.45 trillion• 3 trillion• 3.5 trillion• 6.2 trillion
Aggregate Means
Largest Source of Revenue
Supply-side
Example of Excise Tax
# of Countries Free Trade
Death Tax (real name)
Example of Payroll Tax
Adam Smith Book
Largest State Expenditure
Largest State Revenue Source
Demand-side
PL stands for
Output Measurement
Laissez-Faire
Keynes supported _____-side
Reagan supported _____-side
Invisible Hand
Adam Smith
• What controls the economy?