1. Categories of federal revenue
The three main categories of federal government revenue are individual income taxes, corporate income taxes, and social insurance taxes (Boyes & Melvin, 2013). Individual income taxes are levied upon persons drawing interest from bonds, dividends, and notes from stocks. Corporate income taxes are levied on revenue generated by a corporation, which is filed back to the federal government at the end of a taxable year. Social security taxes are levied on employed individuals by the federal government to safeguard their own future social security benefits.
Receipts from individual income taxes are the biggest source of revenue for the federal government (approximately 50%), followed by social insurance tax receipts. In the last half century, the composition of federal revenues obtained through taxes has significantly shifted, with a growth in individual income taxes and decline in corporate tax incomes as a share of the total (Boyes & Melvin, 2013).
2. Categories of federal government expenditure
The three major categories of federal government expenditure are social security, Medicaid and Medicare, and Defense Department expenditures (Boyes & Melvin, 2013). Medicare and Medicaid expenditures fund health insurance coverage to persons aged sixty five and above. Social security expenditures fund social insurance as well as social welfare programs of the government. Defense expenditures are for the U.S. Department of Defense to facilitate military activities and operations. Mandatory expenditures are payments required by certain laws while the expenditures are termed as discretionary when their payment amounts are subject to renewal on fiscal year basis as part of budget process (Boyes & Melvin, 2013).
Reference:
Boyes, W. J., & Melvin, M. (2013). Economics. Australia: Cengage
