State Government vs Federal Government (Similarities and differences, Essay

State Government vs Federal Government (Similarities and differences, reporting standards etc.) - Essay Example It is appropriate to highlight the differences between the federal and the state government in regard to public resources, and how the same utilized effectively. The budgeting process involves careful planning of how money will be received and spent over a specific period of time (Kieso et al., 2012). Therefore, the major components of a public budget include revenues and expenditures. In the United States, the federal government differs with state governments in as far as the budgeting process is concerned. For instance, the federal management has the authority to control the economy through interest rates while state governments do not have such control over interest rates. The federal government is often at liberty to engage in deficit spending, implying that the federal administration has the ability to increase spending even if the revenue is lower than it should (Kieso et al., 2012). As a result, the public debt in the US has continued to soar over the years. On the contrary, state governments are not at liberty to engage in deficit spending on a large scale, and are bound by the parameters of a balanced budget. The federal government differs with the state governments in a number of ways in as far as the taxation process is concerned. As for the federal government, the Internal Revenue Service (IRS) is the agency charged with tax collection (Kieso et al., 2012). The government uses progressive tax to determine the tax rates in that the more money a person earns, the more the taxes. The most common federal taxes are the withholding tax and the federal tax return. The withholding tax is subtracted from wages that individuals receive, while the federal tax return requires citizens and residents to report their income each year to determine if they owe any income tax to the federal government (Weygandt, Kimmel & Kieso, 2010). Taxes imposed by state governments differ from one state to another, as there is no one system that works for all states.