A Closer Look at the Federal Budget

Originally published in the September 2012 Intelligent Investor

Each year, Washington spends money to provide a variety of services. Ideally, Washington should only spend as much as it takes in so that no deficit is created. But of course this is pure fantasy.

The largest source of federal revenues comes from individuals in the form of federal income taxes and the payroll tax. In contrast, corporations add only a small amount of federal tax revenues to the budget.

For 2012, the federal government expects to bring in around $2.6 trillion in tax revenues. However, it also plans to spend around $3.7 trillion. Thus, the deficit of around $1.1 trillion will be added to the nation’s $16 trillion debt.