Government & Policy

Corporate taxes are, like an individual’s income taxes, a portion of a company’s profit levied by a government to finance public services. Though there is a set corporate tax rate in the U.S., companies often pay a much lower effective tax rate by exploiting loopholes, a subject of near-constant controversy.

A government-sponsored enterprise is a privately-run company that was established by the U.S. Congress to improve the flow of credit to certain sectors of the U.S. economy. The best-known GSEs are Fannie Mae and Freddie Mac, which essentially buy whole mortgage loans from lenders to sell to investors in smaller chunks. Though GSEs are not controlled by the government and their bonds are not backed by the U.S. Treasury, they enjoy the benefits of an “implicit guarantee” that the government won’t stand by while they fail or default on their debt.

The Federal Insurance Contributions Act (FICA) is a U.S. law, passed in 1935 alongside the Social Security Act, that mandates a payroll tax to fund Social Security and Medicare. FICA taxes are levied at a rate set by the federal government every year, and are paid by both the employee and the employer. Self-employed individuals, since they do not have an employer, are subject to a similar law called the Self-Employed Contributions Act (SECA).

Tariffs are a tax imposed by a government on foreign goods when they enter the territory under that government’s control. Tariffs can be specific or ad valorem. Specific tariffs are levies of a specific amount of money per item or unit (e.g., $1 per pound of apples.) Ad valorem tariffs are levies of a percentage of the value of the import (e.g., 10% of a shipment of cars valued at $10 million.) Governments usually impose tariffs to support domestic producers by making their goods competitive with or more attractive than imported goods.

The national debt is the amount of money a federal government owes creditors. National debt is accumulated when a government sells debt securities—Treasury bills, notes, and bonds, in the case of the U.S.—worth more than the revenue it brings in through, for example, taxes. Creditors can include individual investors, financial institutions, corporations, and even other countries’ governments.

Antitrust laws are regulations intended to ensure competition between companies within a market economy. Antitrust laws allow regulatory authorities to break up monopolies and block mergers and acquisitions that would over-concentrate market power. They also aim to prevent corporations from colluding with one another or forming cartels to fix prices and stymie challengers.