More Budget Issues. Progressive vs Flat Taxes 10% of taxpayers pay 2/3 of income tax.

More Budget Issues

Progressive vs Flat Taxes

http://www.optimist123.com/optimist/images/flat_tax_curves.gif

10% of taxpayers pay 2/3 of income tax

Gov’t Borrowing

http://blogs.cfr.org/setser/files/2009/06/private-v-public-borrowing-thru-08-11.pnggov’t doesn’t have a capital budget and these purchases do count in current operating budget

Gov’t Borrowing

http://rlv.zcache.com/democrats_spending_borrowing_us_out_of_debt_bumper_sticker-p128026995264263873trl0_400.jpg

text claims Republicans are now more about cutting taxes rather than reducing gov’t spending but that is likely wrong in view of current issues.

Gov’t Borrowing

Taxes and Public Policy

tax expenditures - special exemptions. Charities, deduction of interest on mortgage interest, deduction on capitol equipment

who do these

exemptions

benefit?

they amount to 1/3 of gov’t’s total receipts

Taxes and Public Policy

tax indexing - 1985- indexed to the cost of living

- those families with high incomes saw savings

- lower income families saw none because taxes on social insurance and excise taxes rose and

those fall disproportionately on lower class citizens

Tax ExpendituresA.K.A. Deductions! Tax payers love them!

•interest on mortgages•employer contributions to health care•IRA contributions•children•State and local taxes•etc.

Lifetime Learning CreditHope Credit - 1st two years postsecondary, $1500 per year. Doesn’t apply to postgraduate or professional programs. Enrolled 1/2 time

Lifetime Learning Credit - undergrad, professional, graduate. If qualify then 20% of first $10,000 cost -max $2000 per year

can’t do both. dependent can’t claim. can claim more than one Hope credit if more than one kid/taxpayer qualifies but only claim one lifetime learning per family

Rise of national security costs

Rise of social service stateIs big too big? compared to other nations?

Eisenhower’s Military Industrial Complex

Dept of Defense 1/5 of budget

Biggest slice is income security expenditures - intergenerational contract

Incrementalismbest predictor is last year’s budget

never address base of budget

agencies assume they will get equivalent to last year’s budget

debate is on the increment

budget always grows a little every year

exceptions:NASA

Uncontrollable expenditures

What? Why is it difficult to change?

Let’s look at gov’t benefits over time

What factors cause it to change?

Gov’t benefits over time

What factors cause it to change?• rising elderly population - rising elderly pop means increasing number of elderly receiving benefits who exert pressure on interest groups• shrinking birth rates• increased life expectancy• voting numbers and rates• more effective elderly interest groups (AARP)• public awareness of issues for the elderly• children can’t vote/organize

create timeline of budget process p 455

create a t chart illustrating how the budget process works through

Congress and how it works through the Executive branch

use pp. 453-457