Question

Explain what is government spending and what is taxes and why they are important to the government budget?

https://www.cnbc.com/2017/06/09/the-reason-small-business-owners-love-trumps-tax-plan.html

Answer 1

Government spending refers to the expenses incurred by the government to govern the country, build infrastructure, provide social services, run government utilities, run national defense, pay salaries to government officials, etc.

Tax is a financial levy which the government imposes upon individuals, businesses or other economic entities for earning income and conducting various economic activities to meet the expenses of the government.

Taxes are the main sources of income for the government. The budget is the allocation of government funds towards various governments plans and programs. In other words, the budget shows how the government is going to spend its tax revenue under various expense heads. The government develops the budget on the basis of its tax revenue. The government would incur budget deficit if its spending is more than its tax revenue. This will result in government debt. Therefore, the tax revenue is the most important consideration in preparing the budget