Question

Compare and contrast how U.S. governments garner revenue and in turn spend all and 40% more of the revenue collected (revenue vs. expenditures). Explain in few paragraphs.

Answer 1

US government has the responsibility of ensuring national security, maximize the wellbeing of its citizens and creating productive opportunities to increase output in the economy. To carry out these functions, the government requires revenue. This revenue comes from various different sources.

Revenue is the income of the government. The main sources of the government's revenue are - income tax paid by the citizens, payroll tax paid by the workers and the employers, corporate income taxes paid by businesses and organisations, excise taxes from the sale of goods, income from custom duties and miscellaneous sources of income (for example loans from different governments or institutions, gift from foreign governments, etc). The individual income taxes and the payroll and corporate taxes form the major bulk of government earning.

The spending by the government can be classified into the following categories - mandatory spending, discretionary spending and interest on the debt. Mandatory spending again forms the major bulk of the spending and this portion funds all the services and amenities provided by the government. Discretionary spending is left to the discretion and occupies a smaller portion of the budget depending on the agenda. The interest payment is the money paid on the accumulated debt.