Citizenship in the Nation

Government Finances

The government of the United States is run like a business. The federal government is the nation’s largest employer, borrower, spender, and consumer. This gigantic enterprise is financed mainly by taxes and by borrowing money.

Three main forms of finance

$ Taxes

$ Borrowing

$ Management

Taxes

• Most government revenues are received through taxes
• Individual taxes are the largest source of money
• Other taxes are corporate income taxes, excise taxes on goods and services, customs duties, and Social Security taxes.
• Miscellaneous income is derived from the sale of government assets, such as offshore drilling rights and land, and from the collection of various licenses and fees.

Borrowing

• Government borrows money by selling securities in the form of bonds and treasury notes to individuals, corporations, and financial institutions
• After a period of time the government pays interest on these securities
• National Debt- the money government owes
• By 1991, the national debt was more than $3.6 trillion, or more than $14,000 for every man, woman, and child in the U.S.

Management

• Internal Revenue Service (IRS) is responsible for collecting all taxes imposed by the the federal government. IRS receives more than 100 million tax returns from taxpayers each year
• The U.S. Customs Service collects taxes called duties, on many imported goods. They also prevent illegal goods from being smuggled into the U.S.
• The treasurer of the U.S. serves as the manager of government funds and pays all the bills
• The Office of Management and Budget (OMB) reviews and alters budget requests from the various departments of the executive branch to comply with the preferences of the president
• The Federal Reserve Board, an independent agency of the government, regulates credit and borrowing in the American banking system.