The role of the government: Basic Principles of Taxation, Collection, Budget,

Planning, Structuring, and Risk Management

Alexis Carlos Cruz

DPA

Local Literature

The Department of Finance (DOF) is the government's fiscal policy custodian. It

develops revenue plans to assure the financing of important government programs that
promote public welfare and accelerate economic development and stability. The
Department envisions that the Department's effective and efficient pursuit of critical tasks
such as revenue generation, resource mobilization, debt management, and financial
market development will provide a solid foundation for a Philippine economy that is one
of the most active and dynamic in the world. The fact that the Department of Finance
existed before the Philippine Republic attests to its significance. The Philippine
Revolutionary Government established the DOF on April 24, 1897, and it has since
experienced significant structural and functional changes, but it has remained an
important department. The Department of Finance now bears the crucial functions of
income production, resource mobilization, and fiscal management. The government must
offer infrastructure, education, health care, and other essential amenities to citizens, and
the DOF must be prepared to support them. Similarly, the DOF must direct fiscal policies
toward an investment-friendly climate, which serves as a stimulus for development. DOF's
powers and functions include, but are not limited to, formulating goals, action plans, and
strategies for the government's resource mobilization effort; formulating, institutionalizing,
and administering fiscal and tax policies; supervising, directing, and controlling the
collection of government revenues; acting as custodian of, and managing all financial
resources of the government Manage public debt; Review and coordinate GOCC policies,
plans, and programs; monitor and support the implementation of policies and measures
on local revenue administration; Coordinate with other government agencies on fiscal,
monetary, trade, and other economic policies; Investigate and arrest illegal activities
affecting national economic interest, such as smuggling, dumping, illegal logging, and so
on (Department of Finance, 2019).

To research from Bangko Sentral ng Pilipinas (2019), Financial systems are crucial
for customers – both corporate and individual – because they connect today's goals with
tomorrow's economic fortunes. Because of the nature of fiat money, financial systems
have historically developed via the banking sector. In this framework, it is in the public
interest to ensure that banks operate safely and soundly. After all, banks handle our
assets, provide vital services such as cash transfer and obligation payment, and provide
a platform for entrepreneurs to pursue their economic ambitions via lending. Banking
regulators foster this by developing a regulatory framework that stimulates innovation
while also ensuring that banks follow mandated governance requirements. The Global
Financial Crisis (GFC), on the other hand, demonstrated how the financial system is more
than the sum of its components. The way each market participant interacts with another
party creates a network of interrelated and sequenced transactions, giving birth to a
distinct feeling of "systemic-ness." As a consequence, risk decisions are interconnected
within the network, resulting in social results that may vary from the aims of private
organizations. This serves as the foundation for the worldwide movement to control the
health of the financial system as a distinct policy goal. Its primary goal is to manage so-
called "systemic risks" via macroprudential regulation. The promotion of "Financial
Stability" is a statutory mission given to the Bangko Sentral ng Pilipinas (BSP). This is
stipulated in the modified BSP Charter (Republic Act No. 11211), which President Duterte
signed in February 2019. The goal of "Financial Stability" is to improve the overall and
component resilience of the financial system to shocks. This is accomplished through
controlling systemic risks that may damage the financial system, ensuring that finance
remains a value offered to customers in normal times while being robust in times of
upheaval. This is the worldwide standard for financial system supervision. Because of its
varied goal, not all bank-specific vulnerabilities are "systemic," just as macroprudential
difficulties involve topics other than banking. Furthermore, since macroprudential policy
focuses on interconnected risk behaviors, its concern might go beyond liquidity or
inflation. Welfare consideration, in particular, is treated differently in macroprudential
policy since negative outcomes have a higher effect on society than predicted positive
results. The management of "Financial Stability" has a specified organizational structure.
This structure is headquartered at the BSP – by our Charter – and collaborates with other
financial authorities, adopting a comprehensive perspective of the financial system. The
quest for Financial Stability has been a journey as market circumstances alter and
stakeholders' risk behaviors are continuously rebalanced.

The national budget is supported by the following funds: 1) income from both tax
and non-tax sources; 2) borrowings from both domestic and international sources; and 3)
withdrawals from available cash balances. Revenues are all monetary inflows into the
national government treasury that are collected to finance government expenditures while
without increasing the NG's liabilities. Revenues are made up of both tax and non-tax
receipts. A tax is a legally compelled payment levied by the government for a public
purpose. The Bureau of Internal Revenue and the Bureau of Customs are the national
government's primary revenue collection authorities. The term "public debt" refers to the
debts assumed by the government and all of its departments, agencies, and
instrumentalities, including government monetary institutions. It includes all claims
against the government that are due in products and services, but frequently in cash, to
foreign governments or people, or to natural or legal persons. Obligations may be: 1)
purely financial, i.e., loans or advances extended to the Philippine government, its
branches, agencies, and instrumentalities; 2) services rendered or goods delivered to the
government for which certificates, notes, or other evidence of indebtedness has been
issued to the creditor; and 3) for external debt, such as claims of foreign entities, securities
held in trust, nonbonded debts, and Philippine government obligations to the International
Monetary Fund (IMF). The Public Financial Management (PFM) Reform Program strives
to promote efficiency, accountability, and transparency in the use of public funds in order
to provide direct, immediate, significant, and cost-effective delivery of public services,
particularly to the poor. The Program carries out the key strategies outlined in the
Philippine PFM Reform Roadmap: Towards Improved Accountability and Transparency
(2011-2016), a comprehensive reform agenda aimed at clarifying, simplifying, improving,
and harmonizing the government's financial management processes and information
systems. The integrated systems will encompass all government transactions and apply
consistently to all government departments. (Public Financial Management Reform
Program, 2021).

The Philippine Constitution of 1987 limits the use of the authority to tax. The
taxation regulation must be consistent and fair. The Congress must devise a progressive
taxation scheme. (Paragraph 1 of Article VI, Section 28) All money received from a
special purpose tax should be considered as a separate fund and used solely for that
purpose. If the objective for which a special fund was established has been met or
abandoned, the balance, if any, should be transferred to the Government's general
revenues. (Paragraph 3 of Article VI, Section 29) The Congress may, by law, allow the
President to determine tariff rates, import and export quotas, tonnage and wharfage dues,
and other levies or imposts within the framework of the Government's national
development agenda, subject to such constraints and restrictions as it may impose
(Article VI, Section 28, paragraph 2) The President has the authority to veto any specific
item or items in an appropriation, revenue, or tariff measure; but, the veto does not impact
the item or things to which he does not disagree. (Section 27, second paragraph of Article
VI) The Supreme Court shall have the authority to review, revise, reverse, modify, or
affirm final judgments and orders of lower courts on appeal or certiorari, as the law or the
Rules of Court may provide, in all cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation thereto. (Paragraph 5 of Article
VIII) Tax exemptions are only permitted by law. However, no bill giving any tax exemption
shall be approved unless a majority of all members of Congress agree. Article VI, Section
28, Paragraph 4 (1) charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, and nonprofit cemeteries, as well as all lands, buildings,
and improvements actually, directly, and exclusively used for religious, charitable, or
educational purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit
educational institutions used actually, directly, and exclusively for education (3)The
Constitution includes provisions for local government taxation in addition to national
levies. Section 5 of Article X Section 6 of Article X In addition to the powers explicitly
assigned to each local government unit, the Local Government Code specifies that all
local government units are granted general tax powers, as well as additional revenue-
raising rights such as the imposition of service fees and levies. However, no such taxes,
fines, or charges may be imposed unless a public hearing is conducted prior to the
ordinance's implementation. The tax cannot be exorbitant, burdensome, confiscatory, or
contrary to established national economic policy (Section 186 and 187) Furthermore,
there are typical constraints to granting the ability to tax to the local government, such as
levies such as income tax, documentation stamp tax, and so on (Bureau of Internal Revenue,
n.d.).

World Bank (2016) The government recognizes that effective public finance
management (PFM) is vital to ensuring that the Philippines meets its development
objectives. A transparent and credible PFM system promotes informed decision-making
as well as the effective and efficient delivery of public goods and services. Under the
auspices of the Philippine Development Plan 2011–2016, the government has
implemented an ambitious reform program to promote efficient and honest administration
and to provide an enabling environment for people and the business sector. The Good
Governance and Anti-Corruption Cabinet Cluster is in charge of implementing a
comprehensive and integrated governance and anti-corruption action plan that includes,
among other things, improved public financial management systems, capacity for results-
based budgeting, and a better policy and regulatory environment for private sector
development. The institutional structure for public financial management is disjointed.
Several agencies are engaged in the deployment and monitoring of PFM systems, and
their duties may overlap in certain circumstances. This fragmentation necessitates tight
collaboration among different entities, necessitates a robust system of checks and
balances, and dilutes responsibility. For example, the Philippines does pretty well in terms
of fiscal reporting and accounting rules when a single agency is responsible, but
questions about data comparability and integrity emerge when many agencies are
involved. Political dangers continue to be significant. While recent attempts to improve
budget credibility are important, the Constitution gives the President broad authority to re-
allocate budget funds throughout the executive branch during implementation.
Furthermore, public expenditure management is still characterized by typically poor
spending efficiency. Underspending in 2014 was mostly attributable to structural
deficiencies in project planning and execution, according to surveys. Poor planning and
program or project design, frequent bidding failures and a lack of procurement staff
capacity, difficulty obtaining clearances or right-of-way, and a lack of LGU implementation
expertise are all common challenges. Previous worries about fiscal sustainability help to
explain the government's historically tight budgetary situation and low amount of public
spending on economic, social, and poverty-reduction initiatives. However, the
government's fiscal consolidation effort has lowered debt payments as a proportion of
GDP from 5.3 percent in 2005 to 2.8 percent in 2013. Intensive efforts to boost tax
collecting resulted in greater revenues from 2010 to 2013. Nonetheless, efforts must be
continued and expanded, since improvements in income and reductions in debt service
will provide budgetary flexibility to enable increasing expenditure on fundamental goods
and services.

Foreign Literature

Taxation is distinct from other modes of payment, such as market transactions, in

that it does not call for the recipient's agreement and is not directly related to the provision
of any services. Taxation is compelled by the government in either an implicit or explicit
form of the threat of force. Taxation is legally distinct from extortion as well as protection
rackets due to the fact that the entity that imposes the tax is the government rather than
private individuals. There has been a significant amount of variation in fiscal structures
across time and between different jurisdictions. In the majority of contemporary taxation
systems, taxes are levied not just on concrete things like property but also on abstract
things like the act of making a sale. One of the most important and hotly debated topics
in contemporary politics is the process of developing new tax policy. In the beginning, the
United States government relied on relatively little revenue from direct taxes. Instead,
user fees were imposed by federal agencies for the usage of ports and other government-
owned properties. In times of financial strain, the federal government may choose to sell
off government assets and debts, or it may choose to tax the states for the services they
have provided. In point of fact, after becoming president in 1802, Thomas Jefferson did
away with direct taxation; excise taxes were the only ones that were left, and Congress
did away with them in 1817. The federal government did not collect any kind of domestic
income during the years 1817 and 1861. During the time of the Civil War, those with
significant incomes were subject to an income tax with a rate of three percent. After the
passage of the Sixteenth Amendment in 1913, the United States federal government
began routinely collecting taxes on people's incomes as a source of revenue. Starting in
2022, taxes in the United States will apply to a broad variety of things or activities,
including income, the purchase of cigarettes and fuel, inheritances, and even the winning
of the Nobel Prize or at a casino or other gambling establishment. The most fundamental
purpose of taxes is to provide financial support for governmental spending. Throughout
the course of history, a variety of arguments and explanations have been presented for
the imposition of taxes. Early taxes were used to subsidize the ruling classes, which in
turn allowed for the formation of armies and the construction of fortifications. In many
cases, divine or supranational rights were seen as the source of the power to levy taxes.
Justifications made in later years have ranged from those based on utilitarian, economic,
or moral reasons. Taxes, according to those who support higher rates of progressive
taxation on high-income earners, contribute to a more equal distribution of wealth in
society. It has been argued that increasing the price of some goods and services, such
as cigarettes or gasoline, in order to discourage usage is a justifiable strategy. Taxes,
according to proponents of the public goods theory, could be required in circumstances
in which the provision of public goods by private entities is seen as being less-than-ideal,
such as in the case of lighthouses or national defense. There are just a few nations in the
world that do not impose any kind of income tax. Saudi Arabia, the United Arab Emirates,
Oman, Kuwait, Qatar, Bahrain, the Bahamas, Bermuda, and the Cayman Islands are
among these countries. The majority of them are Arab countries that are major producers
of oil and finance their governments via exports rather than taxes. Additionally, these
countries have sales taxes and/or corporation tax rates that are among the highest in the
world (Kagan, 2022).

What role the government should play in the economy is a recurring topic in political
disputes. However, calculating the size of government is difficult. Shorthand
measurements, such as the ratio of expenditure to GDP or tax revenues to GDP, are
often used. However, these measurements exclude critical parts of government activity.
They, for example, do not account for how governments employ tax breaks, credits, and
other tax breaks to make transfers and affect resource usage. Many tax advantages, we
suggest, are essentially spending via the tax system. As a consequence, conventional
estimates of government size underestimate both government expenditure and income.
Then, using both standard budget metrics and methods that reclassify "spending-like tax
preferences" as expenditure rather than decreased revenue, we offer statistics on
changes in government spending and revenues in the United States. We find that the Tax
Reform Act of 1986 dramatically lowered the size of the government, but only briefly.
Spending-like tax breaks have since grown and are now greater in relation to the GDP
than they were before tax reform. Finally, we look at how various tax and expenditure
reforms might effect various indices of government size. Reductions in expenditure-like
tax preferences are classified as tax increases in standard budget accounting, but as
spending reductions in our enlarged measure. In our enlarged measure, increasing
marginal tax rates boosts both taxes and expenditure. Some tax hikes, on the other hand,
enhance the size of government. Any attempt to quantify government size must handle
three challenges. The first step is to determine which government operations should be
included. The federal government collects taxes, provides products and services that the
private sector does not supply, participates in commercial-type operations, makes cash
and in-kind transfers to families and enterprises, and pays interest on its loans. It offers
both explicit and implicit financial assurances against a variety of risks, including as
natural catastrophes, terrorist attacks, and financial meltdowns. It governs economic
activities. It also executes monetary policy through the Federal Reserve. All of these
operations would be included in a complete assessment of government size. But it is
outside the scope of our present efforts. Rather, we want to create metrics that truly
represent the totality of the government's budgetary policy. This emphasis is insufficient;
yet, given the significance of fiscal policy, we feel it is important for policymakers and
analysts to have more precise measurements of the government's explicit fiscal size. The
second difficulty is determining whether government expenditure or income should be
measured. These change, sometimes significantly, due to government borrowing. In
general, an emphasis on expenditure stresses the economic resources directed by the
government via fiscal policy. In contrast, an emphasis on revenue highlights the resources
that the government now obtains from taxpayers. People use both measurements, thus
our system takes them into account. However, we feel that expenditure is a better
indicator of government size. Taxpayers must ultimately pay for all expenditure, barring
failure; debt financing today only pushes that responsibility into the future. The third
challenge is determining which accounting concept to employ when calculating
government operations. The federal government currently publishes three sets of
accounts that could serve as a foundation: the official Budget of the United States
Government (Office of Management and Budget (OMB), 2011), the government's
financial statements, which adjust budget figures to more closely resemble accrual
accounting concepts used in the private sector (Department of Treasury, 2010), and the
national income and product accounts (NIPA), which are used to track macroeconomic
aggregates (Bureau of Economic Analysis, 2010-11). There are substantial differences
between these accounting systems. The budget generally monitors the government's
cash flows — spending on programs and tax collections — with a few accrual-type
adjustments for operations where cash accounting would be especially deceptive (e.g.,
loans and loan guarantees). The use of accrual accounting is significantly more prevalent
in the financial statements. They evaluate yearly capital costs, for example, based on
estimates of how much buildings, equipment, and software depreciate each year, while
the budget captures any new investments. Finally, the NIPAs see the government as both
a producer and a consumer of goods and services. Therefore use accrual accounting
rather than budget accounting, and they recognize as receipts those payments, such as
regulatory fees, that are classified as negative expenditure in the budget. 1 There are
compelling justifications for using accrual ideas more often in government decision-
making. An concentration on cash accounting, for example, understates the cost of
federal workers earning future retirement benefits and stresses the upfront cost of new
capital investments while disregarding depreciation of existing capital. Official budget
metrics, on the other hand, dominate fiscal policy debates in the media, academia, and
inside the Beltway. As a result, we concentrate on strategies to enhance standard fiscal
measurements of government size. Policymakers have long understood that tax breaks,
not simply government spending programs, may be used to achieve a variety of social
and economic objectives. Such preferences are reported as revenue decreases, making
the government look smaller, but they often have the same consequences on income
distribution and resource allocation as comparable expenditure initiatives (Bradford,
2003; Burman and Phaup, 2011; Marron, 2011). These choices should be treated as
expenditure rather than revenue decreases in a comprehensive assessment of
government size. This boosts expenditure and revenue metrics without impacting the
deficit, and provides a new view of the economic resources that the government directs.
Making these changes, however, requires prudence. It's tempting, for example, to simply
tally up all of the provisions identified by the federal government as "tax expenditures"
and regard them as spending. But that is taking it too far. Tax expenditures are not always
the functional equal of spending. Tax expenditures are defined by the Congressional
Budget Act of 1974 as "revenue losses related to provisions of federal tax laws that
provide a special exclusion, exemption, or deduction from gross income or that give a
special credit, a preferential rate of tax, or a postponement of responsibility." This
definition's core word is "exceptional." To identify tax expenditures, first define a notional
baseline tax system that includes all general tax provisions, then identify any deductions,
credits, and other provisions that are exceptions to the general rules. The original concept
of a "normal" tax baseline included measures required to execute a workable, broad-
based income tax. 2 The system includes graded rates for individual taxpayers, multiple
methods of designating the taxpaying unit (separate or joint filing for married couples),
and personal exemptions to account for the influence of family size on capacity to pay.
However, the standard tax baseline allows for certain deviations from a complete income
basis. For example, it eliminates from the tax base earned but unrealized capital gains,3
incorporates inflationary increases, and enables a separate corporate income tax in
addition to individual taxes on corporate income. Several writers have proposed
separating tax expenditures that are disguised spending from those that are structural
deviations from a comprehensive income base but do not replace any clearly identified
direct spending program (Fiekowsky, 1980; Kleinbard, 2010; Shaviro, 2004; Toder, 2005;
Marron, 2011). Although the phrasing and labels used by these writers vary, they all
concentrate on a subset of tax expenditures that substitute subsidies or transfer payments
that might otherwise be distributed as outlays. According to this viewpoint, which we
share, only "spendinglike tax preferences" should be included in a "spending" total
intended to gauge the size of government. Unfortunately, determining which provisions
are expenditure equivalents and which are core tax policy decisions is not always clear.
We present a few obvious instances while stressing that it might be difficult to discern
between the two groups at times (Marron & Toder, 2019).

In research from Maranga (2018) A government utilizes both fiscal and monetary
policy to manage the economy. The use of government expenditure and tax collection to
impact the economy is known as fiscal policy. Government expenditure and taxes are the
two primary fiscal policy tools. Changes in the amount and mix of taxes and government
expenditure will have an impact on aggregate demand and economic activity, as well as
the pattern of resource allocation and income distribution. Fiscal policy may also be
utilized to stimulate the economy provided policymakers grasp the link between
government spending and income. According to Abdulnasser (2002), budget
sustainability refers to the government's capacity to retain current spending, taxes, and
borrowing patterns while also modifying policies to meet long-run budget restrictions. In
other words, budget sustainability refers to the government's capacity to maintain a
specific policy position. As a result, the government plays a vital role in budget
sustainability. According to Castro and Cos (2002), excellent budget sustainability implies
that no problems with deficit behavior are predicted and that fundamental fiscal
adjustments are not required. In contrast, a lack of sustainability suggests that the
government may have difficulty selling its debt. Fiscal policy is critical to long-term growth.
Understanding the link between government income and spending is therefore critical for
assessing budget sustainability. There is a substantial public finance literature that
examines the relationship between government income and spending. The majority of
these papers highlight the fiscal authority's attempts to preserve budget balance.
Maintaining a consistent long-term connection between spending and income is a critical
necessity for a stable macroeconomic environment and a sustainable economy from a
fiscal standpoint. Budget deficits occur when government spending exceed government
receipts. Budget surpluses arise when government revenues exceed government
expenditures; a budget balance occurs when government revenues and expenditures are
equal; obtaining a budget balance is challenging.

Most Organization for Economic Cooperation and Development (OECD) nations

accomplish comprehensiveness and openness by establishing a budget system that
includes three main elements. Annuality - A budget is produced once a year, covers just
one year, is voted on once a year, and is implemented once a year. While the essential
notion of annual authorization remains, this principle has been changed at the preparation
stage, so that most OECD nations now build the annual budget with a multiyear
perspective, via the creation of medium-term income and spending frameworks. Only a
handful are considering budget allocations for more than one year at a time. To define
yearly budget objectives, revenue and spending (as well as borrowing limits) should be
examined together. The budget should encompass all government agencies and other
organizations that carry out government activities, so that the budget gives a coherent
image of these operations and is voted on in parliament as a whole. Universality entails
directing all resources to a single pool or fund, which will be distributed and utilized for
government spending based on current government objectives. Earmarking resources for
particular objectives is generally avoided in general; nevertheless, the subject of
extrabudgetary monies is discussed in further detail below. These three features are
required to guarantee that, during budget preparation, all policy proposals for government
spending are pushed to compete for resources, and that priorities are set throughout the
whole spectrum of government activities. They are typically regarded as a prerequisite
for achieving the first two of the four main goals of effective public expenditure
management mentioned at the beginning of this Section: exercising the macroeconomic
constraint of affordability on the total and ensuring efficiency in resource allocation. These
features are usually embedded in the legislative and administrative structure that governs
the budget process. Although the particular legislative structure for central government
budgeting differs by nation, it is often laid out at many levels.In the legal hierarchy, the
constitution is at the top. Although it only addresses broad principles, the constitution may
clarify three important aspects: (1) the relative powers of the executive and legislative
branches with regard to public finances; (2) the definition of financial relations between
national and subnational levels of government; and (3) the requirement, for example, in
Commonwealth systems, that all public funds be paid into designated accounts and spent
only under the authority of the executive and legislative branches. Typically, organic
legislation is the primary mechanism for developing principles of public financial
management. These laws may be a single law that guides budget preparation, approval,
execution, control, and auditing (loi organique relative au budget in the francophone
system; ley de administración financiera in the Latin American system), or they may be a
series of general laws covering specific areas of public finance management (e.g., under
Commonwealth systems) that may also apply to subnational levels of government. They
are referred to as "organic" since they deal with organizational issues and processes and
do not need yearly replay. Furthermore, they are often only modifiable under particular
circumstances, such as qualified legislative majority.

The organic budget law also empowers the government or the minister in charge
of public finance to issue detailed regulations and instructions (for example, décret portant
réglement de la Comptabilité Publique in the francophone system and decreto para la
contabilidad pblica in the Latin American system). These are often fairly detailed.The
constitution, the budget organic legislation, and financial rules are permanent and serve
as the legal framework within which the yearly budget law is written, adopted,
implemented, and audited. Depending on the system, the yearly budget legislation might
take several forms.The coverage of the annual budget law (called budget or loi de
finances in francophone countries and ley anual de presupuestos in Latin America) is
rather broad in the francophone and Latin American systems, as it contains the amount
and details of revenue and expenditure, the balance, as well as any new tax legislation
measures and some changes to spending. Revenue and spending estimates are
provided under the Commonwealth system. The latter are sometimes subdivided into
recurring and development estimates, which are occasionally provided as discrete
volumes. The presentation is often broken down by institution and line item. Prior to any
recent changes, budget projections were supplied by budgetary institution—typically just
the primary supervisory institutions and not their subordinate units—and broken down
only by broad "functions," more or less the sectors utilized in the old central planning
framework (International Monetary Fund, 2020).

Accordong to Corporate Finance Institute (2022) The administration of a country's

income, expenditures, and debt burden via different government and quasi-government
entities is known as public finance. This article explains how public finances are
administered, what the main components of public finance are, and how to quickly
comprehend what all the statistics imply. The financial status of a nation may be analyzed
in the same way that financial statements of a firm can. The primary components of public
finance include actions connected to revenue collection, societal spending, and the
implementation of a financing plan (such as issuing government debt). Tax Collection,
Budget, Expenditures, Deficit/Surplus, National Debt, and so on are the essential
components. Taxation is the primary source of income for governments. Governments
collect taxes such as sales tax, income tax (a sort of progressive tax), inheritance tax,
and property tax. Other sources of income in this category include import fees and tariffs,
as well as money from non-free public services. The budget is a blueprint for the
government's spending throughout a fiscal year. In the United States, for example, the
president presents a budget proposal to Congress, the House and Senate draft laws to
address particular areas of the budget, and the President signs them into law. Read a
copy of the United States government's 2017 budget, as issued by the Office of
Management and Budget. Expenditures are the real dollars spent by the government on
things like social services, education, and infrastructure. Much of the government's
expenditure is intended at redistributing income or wealth to benefit society as a whole.
Actual expenses may exceed or fall short of the budget. A deficit occurs when the
government spends more than it earns in income. A surplus exists when the government
spends less than it receives in taxes. If the government runs a deficit (spending exceeds
receipts), it will borrow money and issue national debt to make up the shortfall. The United
States Treasury is in charge of issuing debt, and when there is a deficit, the Office of Debt
Management (ODM) decides whether to sell government securities to investors.

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