What is the difference between discretionary and mandatory spending? Does the President have to spend money Congress appropriates? What is an apportionment?
What is driving up deficits and debt in the future? Congress controls discretionary spending through the annual appropriations process. In contrast, Congress controls mandatory programs by establishing program rules in permanent law. Rules include such things as who is eligible for benefits, how the benefits should be calculated, and when benefits should be paid.
Two of the largest mandatory programs are Social Security and Medicare, which provide retirement security for millions of Americans. Among other things, the Budget Control Act of BCA set annual caps on defense and non-defense discretionary funding through Congress has since adjusted these limits several times: in , , , and most recently in , to avoid severely underfunding discretionary programs.
There are different measures used to describe the size of the federal debt. Debt held by the public is generally considered to be the most meaningful measure when looking at the effect of the federal debt on the economy. The debt limit is a ceiling Congress places on the total amount of dollars that the Treasury is authorized to borrow.
It generally has no impact on the actual level of federal debt. The actual debt is determined by spending and tax laws previously passed by Congress. The Treasury regularly issues new debt, not just to finance new borrowing but also to raise the cash to pay off existing debt that is coming due.
Refusing to raise the debt limit would not be a decision to stop borrowing; it would prevent the Treasury from paying the bills for previous spending and would place the United States into default. The consequences of default would include higher interest rates for future government borrowing and throughout the economy, and it could well create a financial crisis.
In , Congress suspended the debt limit until August 1, , and called for it to increase to the level of debt outstanding on that date. Treasury has the authority to create some room for new borrowing after that date, so a default would not take place immediately. However, that authority is limited; a future Congress will have to act to avoid placing the country in default. The precise date is uncertain because the timing and amount of actual levels of federal spending and tax collection are uncertain.
The subcommittees conduct hearings with agency leaders about their budget requests and draft appropriations bills setting the funding for each. The full House and Senate vote on their bills, merge both versions of each one, and vote on the identical version of every bill.
Each one, if passed, goes to the president for signature. If Congress passes, and the president signs, all 12 bills by September 30—the last day of the current fiscal year—the country has a new budget in time for the start of the next fiscal year. In the event of a shutdown, the government stops issuing passports, closes national parks and monuments, halts NASA operations, and puts many other functions on hold. When the budget process is finally complete or Congress passes a continuing resolution, the government resumes normal operations.
To see the approved federal budget for a year, you must look at the appropriations bills for that year that were signed into law. Go to the Appropriations and Budget page on Congress. A chart will open.
Scroll down to find various versions of budget legislation in it. To identify which budget legislation in the chart actually became law, look in the chart under the far right column titled "Public Law" for a Pub.
When the amount of money the government collects in taxes and other revenue in a given year is less than the amount it spends, the difference is called the deficit. If the government takes in more money than it spends, the excess is called a surplus. The deficit is financed by the sale of Treasury securities bonds, notes, and bills , which the government pays back with interest.
Get statistics and learn more about the deficit and national debt. The debt ceiling is the maximum amount of debt the government allows itself to hold. How large are individual income tax incentives for charitable giving?
How did the TCJA affect incentives for charitable giving? Taxes and Health Care How much does the federal government spend on health care? Who has health insurance coverage? Which tax provisions subsidize the cost of health care? How does the tax exclusion for employer-sponsored health insurance work? What are premium tax credits? What tax changes did the Affordable Care Act make?
How do health savings accounts work? How do flexible spending accounts for health care expenses work? What are health reimbursement arrangements and how do they work?
How might the tax exclusion for employer-sponsored health insurance ESI be reformed? Taxes and Homeownership What are the tax benefits of homeownership? Do existing tax incentives increase homeownership? Taxes and Education What tax incentives exist for higher education? What tax incentives exist to help families pay for college? What tax incentives exist to help families save for education expenses?
What is the tax treatment of college and university endowments? Tax Complexity Why are taxes so complicated? What are the benefits of simpler taxes? What policy reforms could simplify the tax code? Wealth Transfer Taxes How do the estate, gift, and generation-skipping transfer taxes work?
Who pays the estate tax? How many people pay the estate tax? What is the difference between carryover basis and a step-up in basis? How could we reform the estate tax? What are the options for taxing wealth transfers? What is an inheritance tax? Payroll Taxes What are the major federal payroll taxes, and how much money do they raise? What is the unemployment insurance trust fund, and how is it financed? What are the Social Security trust funds, and how are they financed?
Are the Social Security trust funds real? What is the Medicare trust fund, and how is it financed? Excise Taxes What are the major federal excise taxes, and how much money do they raise? What is the Highway Trust Fund, and how is it financed? Energy and Environmental Taxes What tax incentives encourage energy production from fossil fuels?
What tax incentives encourage alternatives to fossil fuels? What is a carbon tax? Business Taxes How does the corporate income tax work? What are pass-through businesses? How are pass-through businesses taxed? Is corporate income double-taxed? Tax Incentives for Economic Development What is the new markets tax credit, and how does it work? What are Opportunity Zones and how do they work?
Taxes and Multinational Corporations How does the current system of international taxation work? What are the consequences of the new US international tax system? How does the tax system affect US competitiveness? How would formulary apportionment work? What are inversions, and how will TCJA affect them? What is a territorial tax and does the United States have one now? What is the TCJA repatriation tax and how does it work? What is the TCJA base erosion and anti-abuse tax and how does it work?
What is global intangible low-taxed income and how is it taxed under the TCJA? What is foreign-derived intangible income and how is it taxed under the TCJA?
Comprehensive Tax Reform What is comprehensive tax reform? What are the major options for comprehensive tax reform? Broad-Based Income Tax What is a broad-based income tax? What would and would not be taxed under a broad-based income tax?
What would the tax rate be under a broad-based income tax? National Retail Sales Tax What is a national retail sales tax? What would and would not be taxed under a national retail sales tax? What would the tax rate be under a national retail sales tax? What is the difference between a tax-exclusive and tax-inclusive sales tax rate?
Who bears the burden of a national retail sales tax? Would tax evasion and avoidance be a significant problem for a national retail sales tax? What would be the effect of a national retail sales tax on economic growth? What transition rules would be needed for a national retail sales tax?
Would a national retail sales tax simplify the tax code? What can state and local sales taxes tell us about a national retail sales tax? What is the experience of other countries with national retail sales taxes? How would a VAT be collected? What would and would not be taxed under a VAT? What would the tax rate be under a VAT? What is the difference between zero rating and exempting a good in the VAT?
Who would bear the burden of a VAT? Is the VAT a money machine? How would small businesses be treated under a VAT? What is the Canadian experience with a VAT? Why is the VAT administratively superior to a retail sales tax?
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