Revenue Review

Revenue Review

Introduction

The significance of a budget can only be well anticipated and comprehended if it is understood as to what is a budget? A budget is an approximation of the inflows of revenues and incurring of expenditure over a period of time, usually a year (Investopedia 2009). It can be referred as an assessment plan of the estimated income and expenses. A budget is significant to everyone involved with incomes and/or expenditures. Therefore, a budget can be developed for a country, state, provinces, communities, multinational organizations, families and also for a single individual (CIMA 2012).

Budgets are of various natures, majorly of three types. One is the surplus budget condition. This situation is when there is excess of revenues or income over the expenditure. The other condition is of a balanced budget. It is the situation, where the income is exactly equal to the revenues. The third condition is that of a deficit budget. This is where the expenditures are in excess to the income (CIMA 2011).

Discussion

Federal budget is the document of anticipated revenues and expenditures at the national or state level. It refers to the earnings and expenses made by a country in a particular course of time (Taxpolicycenter.org 2013). The revenues and income a country receives is mainly from tax revenues, profits from municipal corporations, export revenues etc. The national expenditure is mainly incurred on public goods, merit goods, imports and welfare payments.

In order to further comprehend the dynamics of federal budget in detail, it is pertinent to analyze a federal budget of a particular country. In our instance, we will analyze a portion of the United States federal budget. If we observe the United States federal budget for the fiscal year 2010, it can be analyzed that 82 percent of federal revenues consists of payroll and individual income taxes. Corporate taxes made up of 9 percent of the revenues. The rest of the balance consists of custom duties, excise taxes, estate and gift taxes, and miscellaneous receipts (these are earnings of the Federal Reserve System and different charges and fees).

The figure illustrated in Appendix, displays the break up of the tax revenue of the government. It can be clearly observed that payroll taxes and individual income taxes accounts for the major portion of the tax revenue. In 2010 the federal government made earnings of $2.2 trillion, which makes up 14.9 percent of GDP (usgovernmentrevenue.com 2013). Since 1950 the largest source of federal revenue of United States has been the individual income tax, contributing on average 8 percent of GDP. There has been growth in income from payroll taxes since the inception of Medicare in 1965. Payroll taxes have increased from 1.6 percent to 6 percent or more since 1980, owing to a combined increase in Social Security taxes and Medicare taxes. The sources for payroll taxes also consist of unemployment insurance, railroad retirement and federal workers' pension contributions. There has been a decline in revenue from corporate income tax from 5-6 percent of GDP in 1950 ...