Government Spending and Taxes
According to Colander (2013), the government has the ability to change the spending and taxes but due to the lengthy budget process it takes approximately two years to implement a fiscal policy. The budget is split between mandated government programs and discretionary spending. The mandated government programs consist of two thirds of the budget which include Medicare, Social Security, and interest on past government debt. According to Federal Spending: Where Does The Money Go (n.d.), Social Security compromises a third of mandatory spending. Medicare is 23% of mandatory spending. Discretionary spending is defense programs and government ...view middle of the document...
Tax rates have remained the same, but income brackets have changed on annually. In 2013, a single filer was taxed the minimum 10% with an income between $1-$8,925 (Efile, 2016). In 2015, a singled filer was taxed the minimum 10% with an income between $1-$9,225 (Efile, 2016). There has been a steady increase of approximately $150 per tax year to the income tax bracket schedule.
Impact on U.S. Economy
Fiscal policies have various impacts on the U.S. Economy. According to “Congress Budget Office” (n.d.), “federal tax and spending policies can affect the economy through their impact on federal borrowing, private demand for goods and services, people’s incentives to work and save, and federal investment, as well as through other channels” (Economic Effects of Fiscal Policy). There is a thin line between spending too little and spending too much. On one had if the Government does not spend anything then the Economy cannot grow, but if the Government spends too much then the Economy could end up in trouble.
Current fiscal policy impacts the amount of taxes that future citizens will pay. If the government runs up long-term budget deficits, then future generations will need to pay higher taxes in order to pay the interest. Similarly, future generations will pay lower taxes if the government creates budget surpluses. Economists have created systems that examine the lifetime taxes and benefits associated with generations or age groups. Those systems are referred to as generational accounting. A government that chronically runs deficits will, at some point in time, have to address that imbalance. This fiscal imbalance will need to be addressed with higher tax revenues and/or reduced government spending. An imbalance is also created when the government benefits received by one generation exceed the taxes paid by that generation. For example, initial recipients of Social Security in the United States received far more benefits than they paid in taxes. Such imbalances are referred to as generational imbalances. Future generations will need to pay more taxes, or receive fewer benefits, in order to address this imbalance. Fiscal policy therefore transfers benefits according to age; it also determines how much each generation will pay the government. (Investopedia, 2016)
Fiscal Policy Effects on Nonprofit Organizations
Projections for fiscal policy for 2016 forward show lower unemployment, continued government spending, raised income taxes, and more disposable income for individuals in the next few years. Additional disposable income and lower unemployment will have a positive effect on nonprofit organizations like St. Jude’s Children’s Hospital. More revenue would likely mean more donations for charities from the public at large. Generational imbalances would imply that the government and nation as a whole would be focused more on taking care of the aging demographic than supporting charities though. Two current possible policy changes that would have...