Question

When the government spends tax dollars where does the money come from? What does the government obtain with the money? Are there any opportunity costs to government taxing and spending?

Answer 1

1. When the government spends tax dollars where does the money come from? The three main sources of Govt. tax revenue are INCOME TAX PAYROLL TAXES CORPORATE INCOME TAXES OTHER SOURCES OF TAX REVENUE Include excise taxes, the estate tax, and other taxes and fees 2. What does the government obtain with the money? Three main spending of US Govt. are MANDATORY SPENDING Social Security, Medicare, and Medicaid, Several welfare programs DISCRETIONARY SPENDING > Defence , Nondefence INTEREST PAYMENTS > On borrowings In the percentage form the following spending of US govt. shown as:

Defense: 15% Health care: 13% Interest payments: 6% • Income security: 13% Benefits for veterans: 5% • Education: 3% • Social security: 24% • Medicare: 15% • Foreign aid: -1% • Other: -5% 3. Are there any opportunity costs to government taxing and spending? Yes, there are three opportunity costs to govt. taxing and spending. Cost of resources used to collect taxes Dead weight loss of Taxation Opportunity cost of the resources to produce the goods which can be used by private sectors also if govt. not use it.