--- title: "Taxes, Public Spending and the Government Budget" description: "Governments raise most revenue from taxes on income, spending and profits, and a tax rarely stays where it is placed: the side of the market that can walk away pays less of it. Spending above revenue " canonical: https://lightmysky.com/learn/civics-and-economics/taxes-public-spending-and-the-government-budget-mt_OEjK6v1-F0 source: https://lightmysky.com/learn/civics-and-economics/taxes-public-spending-and-the-government-budget-mt_OEjK6v1-F0.md retrieved: 2026-11-12 --- > **Agent view.** This is the Markdown twin of the page, for tools and assistants. > When to use this site, and the call that answers each job: https://lightmysky.com/agent-instructions.md > API description (OpenAPI 3.1): https://lightmysky.com/openapi.json · Authentication: https://lightmysky.com/auth.md > Pricing: https://lightmysky.com/pricing.md · Catalog: https://lightmysky.com/llms.txt · Full catalog: https://lightmysky.com/llms-full.txt > Every machine-readable file on this domain: https://lightmysky.com/.well-known/ai-catalog.json > Ask for Markdown with `Accept: text/markdown`, a `.md` address, or `?mode=agent`. # Taxes, Public Spending and the Government Budget Governments raise most revenue from taxes on income, spending and profits, and a tax rarely stays where it is placed: the side of the market that can walk away pays less of it. Spending above revenue means borrowing, and the debt that builds up is judged against the size of the economy rather than in pounds. Subject: Civics & Economics · Area: Economics · Ages 15 to 16 Page: https://lightmysky.com/learn/civics-and-economics/taxes-public-spending-and-the-government-budget-mt_OEjK6v1-F0 ## Ready when they can - Classify a tax as progressive, proportional or regressive and justify it with worked figures - Explain who really bears a tax on a good by comparing the elasticities of supply and demand in that market - Distinguish a deficit from debt and say why debt is quoted as a share of GDP ## Lesson: Who really pays a tax Governments pay for roads, schools, and hospitals with taxes. The main kinds are taxes on earnings, taxes on spending, and taxes on company profits. A fair tax question is always who really pays. If buyers cannot walk away while sellers can, the tax reaches shoppers through a higher price. The side that can walk away pays less. **Example.** Sort taxes with simple incomes of 100, 500, and 1000 coins. A 10 coin bill on each is regressive: 10 percent of 100 but only 1 percent of 1000, so lower incomes carry the bigger share. A flat 10 percent everywhere is proportional: the same share from all. Rates that climb with income are progressive: the bigger share falls on higher incomes. Work the shares before you label. A deficit is a one-year gap when spending beats tax revenue. Debt is the pile of all past gaps added up, minus any surpluses. Big economies quote debt as a share of GDP so countries of different sizes compare fairly. A deficit of 3 coins means little alone: against a GDP of 10 it is heavy, against 1000 it is light. Who really pays a tax sits with the side that adjusts least. Compare supply elasticity with demand elasticity: the less elastic side bears more, since its quantity moves less when price moves. Demand elasticity alone cannot settle it. And who hands the tax money to the government is a different question from who bears it. **Recap.** Work the shares, watch who can walk away, and read debt against the economy. ## Practice 8 questions on this page, each with its working shown. ## Needs first - [Price Elasticity of Demand](https://lightmysky.com/learn/civics-and-economics/price-elasticity-of-demand-mt_4ktSwG3D5q) - [GDP: Measuring an Economy and What It Misses](https://lightmysky.com/learn/civics-and-economics/gdp-measuring-an-economy-and-what-it-misses-mt_JFm9bVs0_n) ## Optional connections - [Taxes & Public Services](https://lightmysky.com/learn/life-skills/taxes-and-public-services-mt_cSz7XTxVAx) ## Opens up - [Where the money goes](https://lightmysky.com/learn/civics-and-economics/where-the-money-goes-mt_eMsYs94O9Z) - [Comparative Advantage and the Gains from Trade](https://lightmysky.com/learn/civics-and-economics/comparative-advantage-and-the-gains-from-trade-mt_gcGxu7E2Y8) - [Measuring Inequality and Arguing About It](https://lightmysky.com/learn/civics-and-economics/measuring-inequality-and-arguing-about-it-mt_oQhtuk8b8T) - [Fiscal Policy: Spending, Taxing and the Deficit](https://lightmysky.com/learn/civics-and-economics/fiscal-policy-spending-taxing-and-the-deficit-mt_TC8A2ecFFL)