7C SOURCES OF GOV’T REVENUE8A GOODS/SERVICES PROVIDED BY THE GOV’T8E TAXES FUND GOV’T SERVICES

EPF7 demonstrate knowledge of how monetary and fiscal policy influence employment, output and prices

EPF8 demonstrate knowledge of the role of govt in a market economy

Sources of Gov’t Revenue

Federal, state, and local governments collect taxes and fees to pay for the goods and services they provide.

What is the source of revenue for local governments?

Local Gov’t Revenue Source

Most local governments depend primarily on property taxes.

What is the source of revenues for state governments?

State Gov’t Revenue Source

Most state governments depend on sales and income taxes.

What is the source of revenue for the federal government?

Federal Gov’t Revenue Source The federal government gets the largest

percentage of its revenue from individual income taxes.

Other sources include : payroll taxes for Social Security and Medicare programs

(i.e., Federal Insurance Contributions Act – FICA) corporate income taxes excise taxes (e.g., tax on cigarettes and alcohol) fees (e.g., park entrance fees) tariffs (i.e., taxes on certain imports, such as steel and

sugar, for the purpose of protecting domestic producers).

Goods/Services provided by gov’t Governments may provide an alternative

method to supply goods and services when the benefits to society of doing so outweigh the costs to society.

What are some of the goods and services provided by the government?

Goods and Services Provided By The Gov’t

The government provides goods and services such as military protection street lights police protection

What are these goods and services not provided by the private market?

Why not provided by private market?

Though schools, roads, and fire protection can be provided by the private sector, the government generally provides them as these services benefit society as a whole. An educated public benefits the whole society. Roads facilitate trade. If one person’s house burns and the fire department

refuses to come due to nonpayment, neighboring houses may also catch fire.

These goods and services may not be provided by the private sector because it would not be profitable for them to do so when non payers might enjoy the benefits.

Taxes & fees fund gov’t services

Governments pay for the goods and services they provide by taxing or borrowing from people.

What types of goods and services does the federal gov’t provide, and what are the sources of its revenue?

Federal Spending & RevenuesThe bulk of federal spending goes toward

national defense payments to Social Security recipients the costs of goods and services, medical

expenditures (i.e., Medicare and Medicaid) interest payments on the national debt.

Most federal tax revenue comes from federal income tax and payroll taxes.

What types of goods and services do the state and local gov’ts provide, and what are their sources of revenue?

State & Local Gov’t Spending & Revenues

The bulk of state and local government revenue is spent on public education public welfare, road construction and repair public safety

Most state and local government revenues come from sales taxes grants from the federal government personal income taxes property taxes