Business / Economy

COMMENTARY: Federal Budget II – where does the money come from?

You perceptions may not be reality - again

Where does the federal revenue come from? This article is a companion piece to my last article that detailed how the $3.8 trillion Fiscal Year 2015 federal budget would be spent. The source for the budget information is once again the White House proposal published by the Office of Management and Budget (OMB).

Unlike our city, county, and state budgets, there is no legal requirement that the federal budget be balanced, and it almost never is. The FY2015 budget has a deficit of $564 billion (14.8 percent of total revenue).  That deficit will be borrowed and added to the national debt that is currently about $18 trillion and on which we pay about $228 billion in annual interest.

It is very difficult to put the national debt in perspective due to inflation and other factors.  Interest rates are currently very low; however, according to the Federal Reserve Bank of St. Louis the national debt was over 100 percent of Gross Domestic Product (GDP) in Q1, 2015.  The annual rate will likely be more than 95 percent of GDP; that’s the highest percentage since World War II and its immediate aftermath.

The balance of government annual receipts, about $3.3 trillion, come from the following sources:

Individual income taxes account for $1.53 trillion (40.2 percent of revenue), while corporate income tax receipts are estimated at $449 billion (11.8 percent). Together income taxes supply 52 percent of the revenue.

Social insurance and retirement receipts are a major source of revenue; Social Security payroll taxes generate $758 billion (19.8 percent), Medicare payroll taxes $232 billion (6.1 percent), Unemployment insurance $57 billion (1.5 percent), and Other retirement contributions $9 billion (0.2 percent). Social insurance together supplies 27.6 percent of revenue.

Excise taxes bring in $111 billion (2.9 percent); estate and gift taxes $18 billion (0.4 percent); customs duties $37 billion (1 percent); deposits of earnings in Federal Reserve System $88 billion (2 percent) and other miscellaneous receipts $43 billion (1.1 percent). These odds and ends total 7.4 percent of revenue.

The total along with the 14.8 percent of borrowed funds may not equal 100 percent due to rounding errors in the billions.

You know, “A billion here, a billion there, pretty soon you’re talking about real money.” – Senator Everett McKinley Dirksen (1896-1969).

Marty Richman

Born and raised in Brooklyn, NY, Marty (Martin G.) spent his teen years in northern New Jersey. He served more than 22 years on active military duty, mostly in Europe, and is a retired U.S. Army Chief Warrant Officer 4, Nuclear Weapons Technical Officer. Marty then worked 25 years in various engineering and management positions in the electronics and energetic materials industries supporting the communications, computer, aerospace, defense and automotive sectors. He is a graduate, summa cum laude, from The College of Hard Knocks, among his numerous awards and accomplishments. He was a regular weekly Op/Ed columnist and feature writer for The Hollister Free Lance for seven years and a member of its editorial board for five years. Marty is a frequent commentator and contributor to BenitoLink on a wide variety of local, state, national and international subjects.   Marty was elected to represent the City of Hollister District 4 on the City Council in November, 2018. Marty and his wife, Joyce, have been residents of Hollister since 1996.