Taxes & Government Budget

Budget deficits & debt

3 Types of Taxes

• Progressive-– Higher % as income rises– Example: Federal Income Taxes

• Regressive-– Consumes larger % of lower income worker’s salary– Example: Gasoline Tax, Bridge Tax

• Flat– Same % for everyone– Example: Sales Tax

Federal Gov’t Taxes

• Federal Income Tax– Progressive Tax: tax rate increases as income increases

• Social Security Tax-– 6.2% of salary on first $110,000 income– Your employer also pays 6.2%!!– Benefit: Receive monthly Gov’t pension starting at 65 (or older)

• Medicare Tax– 1.45% of entire salary– Why: Gov’t health insurance starting at 65

2013 Federal Tax Rate Brackets

Tax Rate Single Married filing Jointly or Qualifying Widow(er)

10% Up to $8,925 Up to $17,850

15% $8,926 – $36,250 $17,851 – $72,500

25% $36,251 – $87,850 $72,501 – $146,400

28% $87,851 – $183,250 $146,401 – $223,050

33% $183,251 – $398,350 $223,051 – $398,350

35% $398,351 – $400,000 $398,351 – $450,000

39.6% $400,001 + $450,001 +

Standard Deduction $6,100 $12,200

New top bracket

Bush Tax cuts are now permanent

Trump’s Tax Plan

Goal: Simplify Tax Code•6 to 3 tax brackets•Less deductions (close loopholes)•Be “revenue neutral”•Do the rich benefit the most?

The Government BudgetGovernment SpendingGovernment Revenue

Taxes All Gov’t Expenses

2014 Budget Summary

• Spending: $3.651 Trillion dollars

• Revenue $3.002Trillion (from taxes)

• Deficit: $649 Billion

• Debt: $18.4 Trillion (2015)

2016 Numbers

$4.0 Trillion

$3.3 Trillion

$650 Billion

$20.4 Trillion

Budget Handout

Government Spending

• Social Security 22.0%

• Medicare 14.0%

• Medicaid 7.0%

• Interest on Debt 6.0%

• Defense Spending 18.0%

• Homeland Security 1.0%

• Education 2.0%

• Other 26.0

• Total 100.0%

46% of Budget

24% of Budget

THANK YOU!

US Demographics

• America’s population is aging– smaller young (echoboomer) generation

– Babyboomers beginning to retire

– By 2040 1 in 4 Americans will be over 65

• Average life span has risen– 77 years men, 81 years women

– why: advances in medical technology, nutrition, etc…

• This FACT ensures that entitlement spending will increase a rapidly growing rate

Entitlement Spending• Includes- Social Security, Medicare & Medicaid

– Citizens are “entitled” to benefits at 65 years of age

• Largest part of Government budget– Consumes approximately 40% of budget in 2011!

• Projected to 60%-70% by 2040!

Wake-Up Call Video

https://www.youtube.com/watch?v=hsUdK70Jtmc

Not Enough Workers?• The ratio of workers to retirees is falling

– This means less money coming in => more going out

Deficit & Debt relative to GDP

• Current Deficit = $649 Billion (2016 numbers)

• Current Debt = $20.4 Trillion• Current GDP = $19.0 Trillion

• Deficit as % of GDP = 3.4% of GDP– Highest since World War II– Recent high (1983) 6% of GDP

• Debt as % of GDP =107.0% of GDP– Highest ever (1946) was 120% of GDP

NATIONAL DEBT AS % OF GDP

Debt:17.9 Trillion

GDP17.5 Trillion

102 % GDP

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Growth of Entitlements

*Current services estimate.

Source: Budget of the United States Government, FY 2005, Office of Management and Budget.

Defense Social Security

Net interest

Medicare & Medicaid

All other spending

1964 1984 2004*

9% 19%

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