of the six roles of government listed: a) Providing a stable institutional framework; b) Promote effective and workable competition; c) Correct for externalities; d) â¦ Overall, human resources were the largest expenditure for the federal government, accounting for 61% of spending during 2007. Therefore, that information is unavailable for most Encyclopedia.com content. A balanced budget occurs when spending and revenue are the same. "The Role of the Government In total, the trustees estimate that the Social Security program will be short by $4.3 trillion over a seventy-five-year period. Governments need money so they can provide important services to their citizens. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates. The government will have a number of roles, possibly at different levels, in managing the contract. Sales and excise taxes are regressive, because the same tax applies to all consumers regardless of income, so less prosperous individuals pay a higher percentage of their income. Role of Local Government in Rural Development (A Case Study of Orumba South Local Government Area in Anambra State). This compares to 9.6% and 14.8% for the second and third quintiles from the bottom and 22.4% for the second quintile from the top. Assessment ratios can vary from less than 0.1 (less than 10%) to more than 1.0 (greater than 100%). EXCISE TAXES AND OTHER RECEIPTS. Excise taxes can be intended to generate revenue or to discourage use of the taxed product (as in high cigarette taxes that raise the per-pack cost in an attempt to discourage smoking). Much of the debate has centered on how the programs should be funded and the role of government in social welfare. The stateâs taxation power extends in the constitution to local governments. Part D coverage is relatively new, having been added to the Medicare program in late 2003. The U.S. Constitution outlines the nation's law-making process and establishes institutions to carry out this function. The law represents the will of the people who have their own cultural and ethical perceptions of reality. In the second report, Tax Relief in 2001 through 2011 (http://www.treasury.gov/press/releases/reports/taxrelief_20012011_052708.pdf), the Treasury gives examples of the tax increases that will affect American families if the Bush tax cuts are allowed to expire. Individual income taxes were the largest single component, amounting to $1.2 trillion, or 47% of the total. Even though tax increases and cuts in services can be enacted to raise money, these actions have political and economic repercussions. Montgomery notes that the tax cuts are projected to save U.S. taxpayers $1.6 trillion by the time they expire. Even though there is no federal sales tax, the federal government does levy excise taxes on items such as airplane tickets, gasoline, alcoholic beverages, firearms, and cigarettes. In between the censuses, annual surveys are. A decrease in the amount of money that banks can loan to the public. Budget deficits returned between 2003 and 2007 and are forecast by the OMB for 2008 through 2011. Figure 9.6 shows the annual surplus or deficit from 1900 to 2012 as reported in the OMB's FY 2008 budget (years 2007 to 2012 are estimated). The government will have to raise these funds by raising taxes, reducing spending, and/or borrowing more money from the public. The following are some results of monetary policy changes: Just as in fiscal policy, it is difficult to achieve the exact results desired. TAX CUT ADVOCATES. The federal government's fiscal policy is concerned with the collection and spending of public money so as to influence macroeconomic affairs. STATE SALES TAXES. (See Figure 9.3.) Property taxes accounted for a fourth of all revenue between 2005 and 2006 and were the largest single source of self-generated money. SMI covers the costs of physician services (Part B) and prescription drugs (Part D). Democrats have suggested that such a sum could also be recouped by, for example, removing the cap on income subject to FICA taxes (those mandated by the Federal Insurance Contribution Act), but President Bush has adamantly dismissed any alternatives that could be construed as a tax increase. (See Figure 9.9.) The federal government also borrows from itself. Assuming a tax rate of $3 per $1,000 of value, the property tax would be three times $75, or $225. Historically, the Republican Party has advocated smaller government and lower taxes. Included in the law were increases in income tax credits for families with children and reductions in estate, gift, and generation-skipping transfer taxes (a special tax on property transfers from grandparents to their grandchildren), but it did not address business taxes. The U.S. Census Bureau performs a comprehensive Census of Government every five years; the most recent was conducted in 2007 (http://www.census.gov/govs/www/cog2007.html). At the same time, life expectancies have been increasing, meaning that elderly people are living longer past retirement age and collecting benefits for more years. Public utilities primarily supply electricity, water, natural gas, and public transportation (such as buses and trains). (See Figure 9.5.) The Federation of Tax Administrators (FTA) is a nonprofit organization that provides research services for the tax administrators of all fifty states. During the late 1970s the national debt began a steep climb that has continued into the 2000s. The 2007 Census of Government found 89,476 local government units in operation. Each of these branches has a distinct and essential role in the function of the government, and they were established in Articles 1 (legislative), 2 (executive) and 3 (judicial) of the U.S. Constitution. This is debt owed by one Treasury account to another. Politicians who wish to remain in office are reluctant to displease their constituents. About $428 billion (28%) of this total was in the form of transfers to other governments, such as local governments within the state. In 2004 the federal deficit reached a record high of nearly $413 billion and then began to shrink. Credits and depreciation schedules reduce the amount of revenue subject to tax. Public welfare and social services composed the single largest expense at $407 billion, accounting for 26% of all money expended. The second largest component consisted of police, fire, and corrections officers. The latest survey data for local government revenues were compiled between 2005 and 2006. According to the IRS (May 1, 2008, http://www.irs.gov/businesses/small/article/0,,id=164871,00.html), as of 2008 only total taxable estates and lifetime gifts exceeding $1 million actually had to pay estate and gift taxes. In 2005 the SMI trust fund was financed largely by revenues from the general fund and supplemented with beneficiary premiums and interest earnings. This came to be known as the privatization of Social Security. He or she is the head of state, leader of the federal government, and Commander in Chief of tâ¦ Miscellaneous taxes include personal and corporate income taxes, motor vehicle license taxes, and a wide variety of other taxes. On the other extreme are those who argue that any income redistribution by government is bad. Executive Office of the President: Overseen by the presidentâs Chief of Staff, this office provides the president with the support he needs to make executive decisions. The four roles of government are: 1. One method used by government to borrow money is the selling of securities, such as bonds, to the public. Through a variety of tax credits and deductions, individuals can lower the amount of income on which taxes are calculated, thereby lowering the amount of tax they pay. In the press release “Treasury Releases Papers on Anniversary of President's 2003 Tax Relief” (May 28, 2008, http://www.ustreas.gov/press/releases/hp999.htm), the Department of the Treasury announces the issuing of two reports in May 2008 that highlighted “the benefits to American families and businesses from the tax relief enacted over the last seven years.” According to the first report, Topics Related to the President's Tax Relief (http://www.treasury.gov/press/releases/reports/president_taxrelief_topics_0508.pdf), the tax cuts have made the individual income tax “highly progressive.” As proof, the Treasury cites data indicating that in 2005 the top 1% of taxpayers paid 39.4%, the top 5% paid 59.7%, and the top 50% paid 96.9% of all individual income taxes. Education was the largest single component, accounting for $525 billion and encompassing about 37% of the total. In February 2008 the Census Bureau released detailed data on state tax collections for 2007. At that point the trust funds will be used to pay the shortfall so that payments to beneficiaries can continue at expected levels. This entire process can take many months, and sometimes longer than a year. Chamberlain and Prante note that even though the U.S. tax system is progressive, the country's overall fiscal system is even more progressive when federal, state, and local government spending distributions are taken into account. Critics of President Bush's tax policy point out that changes in the tax structure unfairly shift the burden from corporations and wealthy individuals to low- and middle-class wage earners, that tax cuts already instituted have erased the federal surplus built up in the late 1990s, and that further tax cuts will lead to unacceptable increases in government debt. This means that the federal government can be well into (or beyond) a fiscal year before knowing the exact amount of its budget for that year. The word fiscal is derived from the Latin term fiscalis, meaning “treasury.” It is believed that a fiscalis was originally a woven basket in which money was kept. It is, however, projected to put increasing pressure on the general fund because of rising health-care costs. However, the economist Alan Viard states the tax cuts “are neither sustainable nor beneficial” unless the federal government makes enormous cuts in government spending, a scenario unlikely to occur. In Who Pays Taxes and Who Receives Government Spending? Recover and rebuild: . Laws created by a national government often overrule laws created by more local governments. In The 2008 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (March 25, 2008, http://www.ssaonline.us/OACT/TR/TR08/tr08.pdf), an annual report on the status of the Social Security trust funds—Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), the Social Security Board of Trustees notes that approximately 163 million people had earnings covered by Social Security during 2007. The Social Security Board of Trustees notes in the 2008 Annual Report that Hospital Insurance (HI), the largest Medicare trust fund, took in $224 billion during 2007. 'To form a more perfect Union' 2. Retrieved October 16, 2020 from Encyclopedia.com: https://www.encyclopedia.com/economics/economics-magazines/role-government-0. Governments also disburse money via contracts with businesses or through social programs that benefit the public. Sales and excise taxes are considered taxes on consumption. Finally, the federal government is a manipulator of the U.S. economy. Sales taxes are a major source of revenue for state governments. Writers have treated it in many ways. Estate taxes are levied against a person's estate after that person dies; gift taxes are levied against the giver while the giver is alive. Beginning in 1970 the United States had an annual deficit for nearly three decades. The FY 2009 budget includes. A property tax is tax levied on the value of land, buildings, businesses, or personal property, including business equipment and automobiles. Nearly 1.4 million of them were employed by local governments and accounted for $6.3 billion of monthly payroll. Without financial intermediaries acting as brokers between lenders and business borrowers, it is difficult to envisage economic growth taking place on a sustained and rapid basis. During early 2005 President Bush campaigned for significant reform of the Social Security program, including allowing younger workers to opt out of the Social Security plan and establish their own retirement savings accounts. For example, if a trust fund takes in more revenue in a year than is paid out, it loans the extra money to another federal account. B. The public loans money to the federal government by buying federal bonds and other securities. The program conditions and requirements have been changed many times over the succeeding decades. 'To promote the general Welfare' 6. Likewise, if spending is higher than revenues, the difference is called a budget deficit. Keep Order 2. Other revenue sources for local governments are public utilities, miscellaneous general revenue, and insurance trusts. The economist Jason Furman complains “if you cut taxes without cutting spending, you're just shifting taxes to the future.”. Indirect taxes are passed on from the responsible party to someone else. ROLE OF GOVERNMENT Continuing with our theme from the New Deal Blog, lets continue the conversation about the role of government. The U.S. Department of the Treasury explains that property taxes in the United States date back to the Massachusetts Bay Colony in 1646 and that the separate states began imposing property taxes soon after declaring independence from Britain. The U.S. Government Accountability Office (GAO) estimates in Federal Debt: Answers to Frequently Asked Questions—An Update (August 2004, http://www.gao.gov/new.items/d04485sp.pdf) the number of workers contributing to Social Security per beneficiary. Social Security was followed by Medicare and income security (both at 13%), and health (9%). The OMB breaks down expenditures into broad categories called superfunctions and narrower categories called functions. As a result the government enforces the ethical and moral values of the people it governs. The total amount of money that the Treasury has borrowed over the years is known as the federal debt, or more commonly the national debt. Miscellaneous general revenue comes from a variety of sources, including interest payments and the sale of public property. (See Figure 9.1.). It includes the president, vice president, the Cabinet, executive departments, independent agencies, and other boards, commissions, and committees.American citizens have the right to vote for the president and vice president through free, confidential ballots.Key roles of the executive branch include: 1. Since their inception, the Social Security and Medicare programs have been a source of partisan contention and debate. An effective government must be adequately resourced through appropriate fiscal policies. Fiscal policy is strongly associated with the economist John Maynard Keynes (1883–1946) and is a corner-stone of Keynesian economics. BORROWED MONEY AND IOUS. The ravages of the Great Depression brought a level of desperation (e.g., the unemployment rate was as high as 25%) that encouraged leaders to attempt to influence macroeconomic factors. The largest single component of federal spending was for the Social Security program, which accounted for 20% of expenditures. In the UK, the Prime Minister leads the government with the support of the Cabinet and ministers. Political system - Political system - The functions of government: In all modern states, governmental functions have greatly expanded with the emergence of government as an active force in guiding social and economic development. Our Founding Fathers feared the concentration of power in a single individual or branch of government. Review of Related Literature. Ad valorem is a Latin phrase meaning “according to the value.”. The Department of Defense had outlays of nearly $129 billion for all military personnel (active and reserve duty) for that year. Most online reference entries and articles do not have page numbers. Governments are responsible for providing services that individuals cannot effectively provide for themselves, such as military defense, fire and police departments, roads, education, social services, and environmental protection. The Federal Reserve includes a seven-member board of governors headquartered in Washington, D.C., and twelve Reserve Banks located in major cities around the country: Boston, New York City, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. It's not clear whether these private group-ride vans can navigate the rules and find a market, but their use raises a fundamental question about the role of government. The Social Security Administration (SSA) indicates in “Retirement Benefits by Year of Birth” (May 5, 2008, http://www.socialsecurity.gov/retire2/agereduction.htm) the age at which full benefits can be paid: People who have worked for at least ten years are eligible for permanently reduced retirement benefits starting at age sixty-two. Bush asserted that his policies would reduce poverty by lowering taxes for low- and lower-middle income families. For accounting purposes, the federal government operates on a fiscal year (FY) that begins in October and runs through the end of September. Four states—California, New York, Texas, and Florida—accounted for 38% of all taxes collected in 2007. Encyclopedia.com. The HI trust fund faces extreme funding problems in future decades because technological advances are expected to dramatically increase health-care costs in the United States. National government is authorized to act based on a legal constitution, federal laws and accepted civil standards. Unlike socialism, communism, or fascism, capitalism does not assume a role â¦ At the $75,000 income level, American families paid an average of $6,649 in state and local taxes, or 8.9% of their income in 2006. In general, the federal government had a balanced budget for more than half of the twentieth century, excluding slight deficits that occurred around World War I (1914–1918) and World War II (1939–1945). Middle-class households received $1.30 for every tax dollar spent, and households in the top quintile received $0.41 for every tax dollar spent. In 1997 intragovernmental debt made up 30% of the total debt. Coverage under Parts B and D is optional and requires payment of monthly premiums. Estate and gift taxes are taxes on wealth. When individuals with higher incomes pay a higher percentage of a tax, it is called a progressive tax; when those with lower incomes pay a larger percentage of their income, a tax is considered regressive. Other major sources of revenue included sales taxes (19%) and individual income taxes (14%). Over the centuries, the human race has experimented with many forms of government. As of 2008, people born in 1929 or later qualify for retirement benefits once they have worked for ten years. A. Overall, tax rates varied from a low of 0.4% in Iowa to a high of 9.5% in Vermont. Self-employed people pay the entire tax bill but can deduct half of it as a business expense when they file income taxes. ." Corporation income taxes accounted for another 13%, followed by other revenue at 4% and excise taxes at 3%. The buyer pays money up front in exchange for the IOU, which is redeemable at some point in the future (the maturity date) for the amount of the original loan plus interest. 'To secure the Blessings of Liberty' (f) Social Distributive Justice: The budget must also be approved by the U.S. Senate. The distribution of income is central to one of the most enduring issues in political economics. Information on the FY 2009 budget is available at http://www.whitehouse.gov/omb/budget/fy2009/. The payroll for that month was nearly $16.8 billion. The average tax burden for families with higher incomes was 8.5% for an income of $100,000 and 8.4% for an income of $150,000. Federal policy makers also engage in purposeful manipulation of the U.S. economy at the macroeconomic level— for example, by influencing supply and demand factors. Because real estate generally increases in value over time, property taxes can increase each year even if the tax rate and the assessment ratio remain constant. Rural development as a new term, which was coined in (1948:62) Mr Creech Jones has no particular definition. Budget surpluses cause the debt to go down, whereas deficits increase the debt. STATE INCOME TAXES. The role of any national government is to protect the safety and well-being of its citizens and the sovereignty of the country's borders. The federal tax on corporate income has been in effect since 1909. It is the responsibility of the Governments to provide information, which is useful to businessmen in carrying out their business activities. Taxes, particularly property taxes, are an important source of revenue for many local governments. The national debt has two components: money that the federal government has borrowed from the public and money that the federal government has loaned itself. . Benefits for widows, widowers, and family members have varying age requirements and other conditions that must be met. The political party that wins the most seats at a General Election takes charge of the Government for five years, until the next General Election. . Thus, FY 2009 covers the period of October 1, 2008, through September 30, 2009. final values for years through 2007 and estimates for 2008 through 2013. Payments from insurance trusts amounted to 11% of state spending. The American Economy. AS A PERCENTAGE OF THE GDP. The legislative branch is responsible for drafting, writing and passing laws that govern the entire nation. The extent of role of government differs in different economies. U.S. government bodies borrow money because they are optimistic that future revenues will cover the IOUs they have written. Reallocation of resources to address market failure. The view that “taxation without representation” was tyranny contributed to the opposition to British rule that led to the Revolutionary War (1775–1783). The role of government is to balance communal and individual good. Tax brackets change as Congress modifies the tax codes, but individuals with higher incomes are always taxed at a higher rate than individuals with lower incomes. Most of the so-called internal debt involves federal trust funds. Like other businesses, the government spends and makes money, consumes goods and services, and employs people. In The Federal Reserve System: Purposes and Functions (June 2005, http://www.federalreserve.gov/pf/pdf/pf_complete.pdf), the Federal Reserve explains that it uses three techniques to indirectly achieve “maximum employment, stable prices, and moderate long-term interest rates”: Cite this article Pick a style below, and copy the text for your bibliography. The debt that the federal government owes to itself is a future burden. Direct taxes (such as income taxes) are paid by the entity on whom the tax is being levied. The government or the state plays an important role in maintaining peace law and order within the economy through effective administrative system. Even though Americans commonly complain about the amount of taxes they pay, the overall tax burden in the United States is generally lower than it is in other advanced economies. When cash revenues from taxes, fees, and other sources are not sufficient to cover spending, money must be borrowed. The government has two main functions: one as a provider and one as a regulator. The top quintile had a tax burden rate of 48.8%. The trustees note that the Medicare HI trust fund faces a shortfall much sooner than the OASI and DI funds. One of the central purposes of the government is to enforce the law. What is the role of government in society? According to the Census Bureau (May 16, 2008, http://ftp2.census.gov/govs/estimate/06slsstab1a.xls), salaries and wages for local government employees amounted to $518.1 billion, or 37% of the total expenditures between 2005 and 2006. If these revenues are not sufficient to fund desired programs, governments borrow money. For example, the Treasury predicts that a family of four with one income earner making $40,000 per year in 2007 dollars will experience a tax increase of $2,345 in 2011. Like many members of the public, government entities sometimes spend more than they make. An Analysis of Federal, State, and Local Tax and Spending Distributions, 1991–2004 (March 2007, http://www.taxfoundation.org/files/wp1.pdf), Andrew Chamberlain and Gerald Prante of the Tax Foundation, a non-partisan tax research organization, split American taxpayers into five quintiles based on household income and estimate each quintile's tax burden as a percentage of income. The role of the government is to ensure basic law and order, through ensuring the rule of law. Detailed data on the finances of the federal government are maintained by the Office of Management and Budget (OMB), an executive office of the U.S. president. The executive is the arm of government which is responsible for executing laws or any government policy. To generate the revenue necessary to provide services, governments collect taxes and fees and charge for many services they provide to the public. (See Figure 9.3.) The role of government in business is one of the most contentious issues in politics, and ideas about the role that government should play make up the majority of difference between political ideologies in the United States. Monetary changes are achieved indirectly through the nation's banking system. These vary in value, interest paid, and set terms. TAX CUT CRITICS. Likewise, an undersupply can lower consumer demand too much and stifle economic growth. Monetary policy is concerned with influencing the supply of money and credit and the demand for them to achieve specific economic goals. The Medicare Supplementary Medical Insurance (SMI) trust fund had revenues of $238 billion during 2007. Headquartered in Washington, D.C., the agency is…, Tax returns include all the required paperwork that accompanies the remittance of taxes to the appropriate government agencies, the largest of these…, A tax with a rate that decreases as the taxpayer's income increases. Five divisions: 1 stateâs taxation power extends in the future likely consequences of paying back the loan difference known... Retrieval is often important assessment ratios can vary from less than 0.1 ( less than 0.1 ( less 10. By exporting nation dollars per hundred or thousand dollars of value are also known as fiscal policy monetary! Businesses, the CIA ranks nations of the benefits currently available to beneficiaries can at. 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