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

http://www.cagw.org/reports/pig-book/2010/

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?