Te a c he r M a te r
ials
The Federal Budget
The Federal Budget
Revenue: Where the Money Comes From
In order to pay for programs and services, the federal government raises
money from the following sources:
Sources
In billions of dollars
2011
2012
Percent of Total
2012 Budget
Individual Income Taxes
910
946
45.10%
Social Insurance and Retirement
Receipts
Corporate Income Tax
891
878
41.85%
138
147
7.01%
Excise Taxes
62
70
3.33%
Estate and Gift Taxes
23
16
.76%
Customs Duties
22
24
1.14%
Miscellaneous Receipts
17
17
.81%
2,063
2,098
Total Receipts
100%
Explanation of Categories:
• Social Insurance and Retirement Receipts = Payroll taxes on
annual earnings used to fund unemployment, retirement,
survivor’s benefits, disability, and hospital insurance.
• Excise Taxes = Taxes applied to certain products and services (e.g.,
alcohol, tobacco, petroleum, gambling), and generally paid by
consumers.
• Estate and Gift Taxes = Taxes paid on money or property given
away during one’s lifetime or left to heirs at one’s death.
• Customs Duties = Taxes paid on earnings or goods imported
into the United States.
• Miscellaneous Receipts = Federal Reserve earnings, fines,
penalties, and forfeitures.
For more information on these tax categories, see: http://www.irs.gov/taxstats
For a glossary of terms used in the federal budget tables, see
http://www.gao.gov/new.items/d05734sp.pdf
Source Congressional Budget Office http://www.cbo.gov/ftpdocs/108xx/
doc10871/Chapter4.shtml
©2012 Interact - www.teachinteract.com
The Better Budget - Teacher Guide 55
Te a c he r M a te r
ials
The Federal Budget
Where the money comes from
1.14%
0.76%
3.33%
0.81
%
Miscellaneous Receipts
Customs Duties
7.01%
Estate and Gift
45.1
%
41.85%
Taxes Excise Taxes
Corporate Income
Tax
Social Insurance and Retirement
Receipts Individual Income Taxes
Federal Expenditures: Where the Money Goes
What the government spends can be divided into two major categories:
discretionary and mandatory expenditures.
Discretionary
• Discretionary expenditures are monies that Congress has the
power to cut if it chooses.
• Discretionary spending covers a wide variety of government
functions, including national defense, education, environmental
protection, law enforcement, research, international aid, and
government operations.
Mandatory
• Mandatory spending includes entitlement programs like Social
Security, Medicare, Medicaid, and interest payments on the federal
debt.
• Congress is obligated to spending levels on these mandatory
programs based on factors that are beyond its direct control.
The federal government pays for the following services and programs
Te a c he r M a te r
ials
The Federal Budget
56 The Better Budget - Teacher Guide
www.teachinteract.com
©2012 Interact -
Te a c he r M a te r
ials
The Federal Budget
In billions of dollars
2011
2012
Sources
Percent of Total
2012 Budget
Defense (discretionary)
656
690
19.58%
Non Defense (discretionary)
581
682
19.35%
Social Security
678
700
19.86%
Medicare and Medicaid
750
808
22.92%
Other Mandatory Spending
861
621
17.6%
Offsetting Receipts1
-195
-183
-5.18%
Net Interest
187
207
5.87%
Total Outlays
3,518
3,524
Total Receipts
2,071
2,098
Surplus/Deficit
-1,447
-1,426
100%
Where the money goes
Net Interest
5.87
%
Other Mandatory
19.58%
17.6
%
Spending Medicare and
Medicaid Social Security
19.35
%
22.92
%
Non Defense
(discretionary)
19.86%
Defense (discretionary)
Te a c he r M a te r
ials
The Federal Budget
1. Offsetting receipts differ from revenues, such as taxes. They are
monies collected from government transactions such as
premiums on Medicare or rental payments and royalties for the
use of public lands.
For more information about the federal budget and for updated
figures, consult
http://www.aps.org/policy/resources/budgetsites.cfm
Source Congressional Budget Office http://www.cbo.gov/ftpdocs/108xx/doc10871/Chapter3.shtml