Warm up
• How do you feel about the idea of paying
taxes in the future?
• Should they be higher or lower? How and
why?
7.2 Taxes
Evaluate how the government
collects and distributes tax revenue
I. The Constitution and Taxes
A. Article 1, Section 8
A. “power of the purse” (taxing)
B. First power given Congress
C. Used to run government
B. Limitations
A. No taxes on churches (1st Amendment)
B. Taxes used for public purposes only
C. Early Taxes
1. duties, tax on goods coming in to country,
main source of gov’t money for a long
time
2. Direct tax- based on population (3/5
compromise included slaves)
3. Indirect tax- on goods (liquor tax)
II. FORMS OF TAXES
A. Income tax
A. Allowed by 16th Amendment
B. It is a Progressive tax:
percentage paid goes up with income
1. Percentage determined with Tax
brackets
1992
1993 2000
2001
2002
2003 2007
10%
10%
to $8000
15%
15%
15%
15%
15%
to $32500
28%
28%
27.5%
27%
25%
to $79000
31%
31%
30.5%
30%
28%
to $165000
36%
35.5%
35%
33%
to $358000
39.6%
39.1%
38.6%
35%
and above
B. Corporate Income Tax
A. On corporations
B. US is highest in industrialized
nations.
C. Capital gains taxes- on stock market
profits
D. Payroll taxes
1. Social Security- for retired and disabled
2. Medicare- healthcare for elderly
E. Other taxes
1. Excise Taxes- taxes on goods and services
1. They are Regressive taxes- takes a larger
percentage of income from poor than wealthy.
•
•
•
Ex: Gasoline tax is 10%.
$100.00 of gas is a $10 tax.
That $10 is tougher for poor to pay than wealthy.
2. Gifts and estates
1. “inheritance” or “death” tax
2. Gifts up to $12000 not taxable
Taxes in depth worksheet
Warm up
In your opinion
1. When considering the budget for the federal
government, what types of things would you
put at the top of your list? Why?
2. In what ways would your federal budget
differ from your personal budget you did on
the budget project?
7.2 notes part 3
III. BUDGETING & SPENDING
I. The Government’s Budget
• A. budget – plan for how the government will
raise and spend money
1. Created by President and Congress
2. Fiscal Year – a 12 month period for which a budget is
effective.
3. Begins Oct. 1 and ends Sep. 30 of the following year
B. Revenue vs. Expenditures
• Revenue: tax money flowing into government
• Expenditures: money being spent by
government
C. Spending is divided into two types:
1. Mandatory Spending – spending that does not
need annual approval
• Examples: Social Security Benefit Checks and interest
payments on the government debt.
2. Discretionary Spending – expenditures that must
be approved each year
• Examples: Money for highway construction and
military/defense.
D. Budget Breakdown
• 1. Entitlement
programs – social
security, Medicare and
Welfare – 50% of the
budget
• 2. Defense – 20%,
• 3. interest on debt 8-9%
E. Borrowing
• 1. Deficit – spending above revenue ($1.5
trillion)
• 2. Debt – money borrowed and not paid
back
How Quickly Does the Debt Grow?
• Let’s find out
• http://www.usdebtclock.org/
IV. THE BUDGET PROCESS
A. Budget Process
• 1. President sends a budget outline to Congress.
• a. Office of Management and Budget- office within the
Federal Bureaucracy (Executive Branch) whose function is
to assist the President to prepare the budget
• 2.Congress then passes a budget resolution
• a. Plan for revenues and spending for the year
• b. sets target for how money will be spent in
various categories
3. Must be approved by both chambers and then signed into law or
vetoed by the President.
4. Current annual budget is near $4 trillion
Creating the Budget
$
WHERE DOES THE FEDERAL
BUDGET COME FROM??
The Federal Budget
$
The Federal Budget
$
A budget is…
A. a type of plan for printing
money.
B. something the government uses
to measure things.
C. a plan for receiving and
spending money.
D. a pet bird.
The Federal Budget
$
The federal budget is…
A. a type of plan for printing
money.
B. the US government’s plan for
managing revenue and spending.
C. the President’s plan to save a
lot of money.
D. a really big pet bird.
Creating the Federal Budget
$
Now that you know what the federal
budget is…
(a plan for managing
revenue and spending)…
you will learn about how the federal
budget is created!
Creating the Federal Budget
$
The goal is for
THIS PERSON and THESE PEOPLE
to work together to
create a federal
budget for the
country.
The President
The Congress
Creating the Federal Budget
$
The first thing you should
know is that it takes over a
year for a budget to be
created.
The President and his team at the
Office of Management and Budget
work to develop a proposal for the
budget.
Step One: President’s Proposal
$
This budget proposal is due on the
1st Monday in February
and it includes the following things:
• spending priorities
• plans for raising revenues
through taxes
• lots of documents supporting
each item!!
STEP ONE:
President’s Proposal
Step Two: Budget Resolutions
$
The House of
Representatives
comes up with its
plan for the
budget…
The Senate
comes up with its
plan for the
budget…
In order to develop their plans, they take
several things into consideration:
• the President’s budget outline
• the previous year’s budget
• new programs or projects that government
agencies want to start
Step Two: Budget Resolutions
$
These budget
plans include lots
of details and
contain tables
like this:
Step Two: Budget Resolutions
$
These plans are called RESOLUTIONS…
A budget resolution is a
document that lays out a rough
budget. It is a plan for Congress
as they work to create an official
budget.
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
STEP TWO:
Senate Budget Resolution
Quick Review!
$
A budget resolution is…
A. a budget plan that the President must
sign into law.
B. a plan written by Congress that sets
guidelines for the budget.
C. when two people come together to get
over their financial differences.
D. the stuff you spray on stains on your
carpet, right?
Step Three: Conference Committee
$
Once budget resolutions are
made, it is time for the House
and the Senate to come
together to create the budget!
Step Three: Conference Committee
$
And selected Senators
from the Senate…
Selected Representatives
from the House…
come together in a…
CONFERENCE COMMITTEE
Step Three: Conference Committee
$
CONFERENCE
COMMITTEE
A Conference Committee
brings the House and Senate
committee members together to
resolve differences between the
two houses of Congress.
Step Three: Conference Committee
$
CONFERENCE
COMMITTEE
The goal of this
Conference Committee
is to approve one final
budget resolution that
combines the House and
the Senate’s budget
resolutions.
JOINT
Budget
Resolution
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
STEP TWO:
Senate Budget Resolution
STEP THREE:
Conference Committee to Approve
Budget Resolutions
Step Four: Appropriations Committees
$
Once the Conference Committee
has created a joint budget
resolution the House and Senate
have to tackle the massive
project of creating a budget.
Step Four: Appropriations Committees
$
This job is made a little bit easier by dividing
spending on specific projects into categories…
Twelve different categories!
Energy State Dept Transportation
& Foreign & Urban Dev.
Commerce,
Justice,
Science
Agriculture &
Rural Dev.
Financial
Interior &
Services Environment
Legislative
Branch
Homeland
Security
Veterans
Affairs &
Military
Construction
Labor,
HHS,
Education
Defense
Step Four: Appropriations Committees
$
Each of these categories is given to an
APPROPRIATIONS subcommittee to pass an
APPROPRIATIONS bill!
appropriation = money set aside for a specific purpose
For example…
The Appropriations Subcommittee on Defense
would decide to set aside $6.5 billion for
researching and building a new type of fighter jet.
That is an appropriation!
Step Four: Appropriations Committees
$
The House and the Senate both split into these 12 smaller committees!
House Appropriations Committees
Senate Appropriations Committees
Each committee develops a
plan for spending money on
smaller, specific projects in its
category.
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
House Votes
STEP TWO:
Senate Budget Resolution
STEP THREE:
Conference Committee to Approve
Budget Resolutions
STEP FOUR:
12 House Appropriations
Committees
Senate Votes
STEP FOUR:
12 Senate Appropriations
Committees
Step Five: Committees Work Together
$
House
Senate
Each
Appropriations
Subcommittee from
the House meets
with the matching
Appropriations
Subcommittee from
the Senate…
Step Five: Committees Work Together
$
House
Senate
…and they work
together,
comparing their
appropriation bills
and making
compromises, until
each subcommittee
has one final
version!
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
House Votes
STEP TWO:
Senate Budget Resolution
STEP THREE:
Conference Committee to Approve
Budget Resolutions
STEP FOUR:
12 House Appropriations
Subcommittees
Senate Votes
STEP FOUR:
12 Senate Appropriations
Subcommittees
STEP FIVE:
Appropriations Committees Work
Together & Compromise
Quick Review!
$
An appropriations bill is…
A. something that balances out
mandatory and discretionary spending.
B. a bill that manages money spent on
the army.
C. a bill that lays out how money will be
spent on specific projects.
D. an equation for solving proportions.
Congress Votes
$
Each committee returns to its house of Congress and presents
its appropriations bill.
The House
votes…
The Senate
votes…
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
House Votes
STEP THREE:
Conference Committee to Approve
Budget Resolutions
STEP FOUR:
12 House Appropriations
Committees
House Votes
STEP TWO:
Senate Budget Resolution
Senate Votes
STEP FOUR:
12 Senate Appropriations
Committees
STEP FIVE:
Appropriations Committees Work
Together & Compromise
Senate Votes
Step Six: To the President!
$
When approved by both
houses of Congress, the
bills head to the
President!
Step Six: To the President!
$
The President gets to
decide if he will sign the
appropriations bills or veto
them! If he signs them,
they become part of the
final budget
And all this has to happen
by October 1st…
*Whew*
STEP ONE:
President’s Proposal
STEP TWO:
House Budget Resolution
House Votes
STEP TWO:
Senate Budget Resolution
STEP THREE:
Conference Committee to Approve
Budget Resolutions
STEP FOUR:
12 House Appropriations
Committees
House Votes
Senate Votes
STEP FOUR:
12 Senate Appropriations
Committees
STEP FIVE:
Appropriations Committees Work
Together & Compromise
STEP SIX:
To The President!
Senate Votes
The Budget in Action
$
The new federal budget goes into
effect on October 1st.
Government agencies (like the
Department of Defense or the
Department of Energy) can only
spend the money that has been
appropriated for them by the final
bills that were signed by the
President.
REVIEW
$
Put the six steps in order:
$
Which comes first?
A
Appropriations Committees
Work Together
D
To The President!
Conference Committee
to Approve Resolutions
B
Budget Resolutions
E
C
President’s Proposal
F Appropriations Committees
Put the six steps in order:
$
Which comes second?
A
B
Appropriations Committees
Work Together
Budget Resolutions
1 President’s Proposal
D To The President!
E
Conference Committee
to Approve Resolutions
F Appropriations Committees
Put the six steps in order:
$
Which comes third?
A
Appropriations Committees
Work Together
2
1 President’s Proposal
Budget Resolutions
D To The President!
E
Conference Committee
to Approve Resolutions
F Appropriations Committees
Put the six steps in order:
$
Which comes fourth?
A
Appropriations Committees
Work Together
2
1 President’s Proposal
Budget Resolutions
D To The President!
Committee
3 toConference
Approve Resolutions
F Appropriations Committees
Put the six steps in order:
$
Which comes fifth?
A
Appropriations Committees
Work Together
2
1 President’s Proposal
Budget Resolutions
D To The President!
Committee
3 toConference
Approve Resolutions
4Appropriations Committees
Put the six steps in order:
$
Which comes sixth?
Committees
5 Appropriations
To The President!
D
Work Together
Conference Committee
3
Budget
Resolutions
2
to Approve Resolutions
1
President’s Proposal
4Appropriations Committees
REVIEW
$
2
1
President’s Proposal
Budget Resolutions
Committee
3 toConference
Approve Resolutions
Great
4Appropriations Committees
Job!
Committees
5 Appropriations
Work Together
6 To The President!
BONUS QUESTION
$
The federal
budget is created
between what
two days?
BONUS QUESTION
$
The first Monday in
February and
st
October 1 !
Seth Rogan at an Appropriations
Committee Meeting
• https://www.youtube.com/watch?v=hvdbHSG
WAgs