Question

1. Which is the largest source of revenue for the Federal government? California State government?

2. What item takes the largest share of the federal government spending? State government spending?

3. What is the most recent outstanding national debt of United States? Assuming a 340 million population in United States, what is the per capita debt of United States?

4. Why are taxes on common items such as gasoline and toiletries considered highly regressive? Explain clearly.

Answer 1

Individual income taxes have been contributing a major chunk of the federal government amounting close to 50% of the revenue.  

Similarly, a major soure of revenue for California state government is the personal income tax, accounting to close to 69% of the total revenues.

Social Security is the single largest mandatory government spending which amounts around 38% of the $2,736 billion total government expenditure.

In California, healthcare is where a major portion of the government spending is channelized. Close to 33% of the expenditure.

$22 Trillion is the public debt of US at the moment, and no wonder it happens to be the highest debt amount till date.

Per-capita debt = $22 Trillion/340 Million

= $64,705.88

4.

A regressive tax affects people with low incomes more severely than the higher income population because the taxation is applied uniformly to all situations, regardless of who the taxpayer is.

Gasoline and toiletries are inelastic goods, meaning that the demand for the goods are no matter the same even though their prices skyrocket owing to an increased tax (as they are essential goods with no substitutes or alternatives). Taxes on these goods are usually high to counter the large demand, and these high prices take a toll on the bottom faction of the people as these commodities consume a larger chunk of their revenues than it was before. Therefore, we can say that both these goods are highly regressive to a point that the bottom faction of the society is worse off by this taxation system.

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