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14.1 Sources of Federal Revenue
Sources of Federal Revenue
Tax levied on manufacture, transportation, sale, or consumption of a good.
Smallest share of federal revenue
Generally progressive (higher % with higher income).
Social Insurance Taxes
Money deducted from employees' paychecks, and matched by their employers.
$ goes the Social Security Trust Fund (which pays benefits to the elderly, disabled, widowed, unemployed).
Most gov borrowing is for day-to-day expenses, not capital needs.
FEDERAL DEBT = HUGE!
Borrowing shifts burden of repayment to future taxpayers
Gov't borrowing may "crowd out" private borrowers
Makes gov't dependent on foreign investors
Fears are overblown; national debt has relatively little to do with overall health of economy
Taxes and Public Policy
Most of gov't income from taxes.
Tax policies can promote the interests of particular groups or encourage specific activities.
Gov't revenue losses; special exemptions on federal tax law.
Can be seen as "loopholes" to evade taxes, or a subsidy that supports a specific social activity.
Standing in the way of tax cuts is never popular.
Usually difficult for reform to occur. However...
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