1: REVENUES & TAXES
Match the level of government revenues with the level of spending. Other Information:
WHERE THE MONEY COMES FROM: REVENUES & TAXES -- In order to balance our budget and reduce the amount of debt the government
takes on each year, we must match the level of government revenues with the level of spending. Currently, the government spends
approximately $3.5 trillion a year, which is far more than the approximately $2.1 trillion it collects in taxes. This imbalance
between spending and tax revenues is expected to continue, and even grow, over the next several decades. By 2040, revenues
will only cover half of total spending. We can reduce our spending, increase our revenues, or a combination of the two. The
more we reduce our spending by making the kinds of changes described earlier, the less we will need to raise taxes. On the
other hand, the more we raise taxes, the less we would need to cut spending. The government generates revenues mostly through
taxes placed on the income of individuals and corporations. In addition, the code allows for many forms of "deductions" and
"tax credits," often called "tax expenditures" because they give a benefit and are therefore similar to spending. Tax expenditures
cause the government to give up about $1 trillion per year in revenue. These and other special provisions also add complexity
to the process of filing taxes. Additionally, our high corporate tax rate puts U.S. companies at a disadvantage in the global
marketplace, but raises less corporate tax revenue than most economically developed nations. Taxpayers also use the conflicting
rules on capital gains taxes to their advantage, further lowering government revenue. Our tax system is complicated and does
not raise sufficient revenues to finance the nation's spending. There are many ways to increase revenue. There are also changes
that we can make to improve how our overall tax system works.
Objective(s):
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