Chapter 12 Paying for Government

HOLT, RINEHART AND WINSTON11

CIVICSCIVICS IN PRACTICEIN PRACTICEHOLTHOLT

Chapter 12Chapter 12

Paying for GovernmentPaying for Government

Section 1:Section 1: Raising MoneyRaising Money

Section 2:Section 2: Types of TaxesTypes of Taxes

Section 3:Section 3: Managing the Country’s MoneyManaging the Country’s Money



The Main IdeaEach year the local, state, and federal government provide

Americans with services such as police, schools, highway construction, and defense. These services cost huge amounts of money. The government pays for these services with taxes

collected from citizens.

Reading Focus Why is the cost of government so high? What guidelines do governments use when taxing citizens? Other than taxes, what are two ways to pay for government?




Fiscal Policy [02:05] Fiscal Policy [02:05]



The cost of government is high due to:The cost of government is high due to:

A population of more than 281 million peopleA population of more than 281 million people The rising cost of livingThe rising cost of living More government programs and services like More government programs and services like

defense spending and payments to the elderly, defense spending and payments to the elderly, disabled, or impoverisheddisabled, or impoverished

The national debtThe national debt




Deciding how to spend the Deciding how to spend the government’s money:government’s money:

Officials establish government’s priorities.Officials establish government’s priorities. Priority is given based on urgency and need.Priority is given based on urgency and need. Debate over the country’s priorities is Debate over the country’s priorities is

common.common.




Taxes: How They Help the Government [01:02]Taxes: How They Help the Government [01:02]



Principles of taxation:Principles of taxation: Ability to payAbility to pay——based on earned incomes; based on earned incomes;

poor do not pay income taxpoor do not pay income tax Equal applicationEqual application——tax applied at the same tax applied at the same

rate for similar taxable itemsrate for similar taxable items Scheduled paymentScheduled payment——taxes due by April 15taxes due by April 15 Fees, fines, and payments for special services Fees, fines, and payments for special services

also raise government funds.also raise government funds.




Question: What guidelines do governments use when taxing citizens?

SECTION 1

Principles of Taxation

ability to pay

scheduled payments

equal application



Taxes [01:08] Taxes [01:08]



The Main IdeaTaxes are the main source of revenue for the

local, state, and federal governments. The types of taxes each level of government uses

to raise money vary.

Reading Focus What are the two main kinds of income taxes? What are the other major types of taxes??




Different types of taxes:Different types of taxes: Individual income taxIndividual income tax——the largest source of tax the largest source of tax

revenue; most citizens pay federal, state, and local revenue; most citizens pay federal, state, and local income taxesincome taxes

Sales and excise taxSales and excise tax——sales taxes are collected by sales taxes are collected by state or local governments; excise taxes (on “luxury” state or local governments; excise taxes (on “luxury” items) are collected by the federal governmentitems) are collected by the federal government

Property taxesProperty taxes——chief income for most local chief income for most local governments; funds public educationgovernments; funds public education




Different types of taxes: Different types of taxes: (continued)(continued)

Estate, inheritance, and gift taxEstate, inheritance, and gift tax——estates of the estates of the deceased, value of inheritances, and monetary gifts deceased, value of inheritances, and monetary gifts above $10,000 are taxable by the federal governmentabove $10,000 are taxable by the federal government

Import taxImport tax——tariffstariffs on imported products used to on imported products used to regulate traderegulate trade




Progressive and Regressive TaxesProgressive and Regressive Taxes

Progressive taxesProgressive taxes take a larger percentage of take a larger percentage of income from highincome from high--income groups. Example: income groups. Example: individual income taxindividual income tax

Regressive taxesRegressive taxes take a larger percentage of take a larger percentage of income from lowincome from low--income groups. Example: income groups. Example: sales taxessales taxes




Tariffs and the U.S. EconomyTariffs and the U.S. Economy Tariffs are taxes placed on goods imported from Tariffs are taxes placed on goods imported from

foreign countries.foreign countries. Tariffs can help the U.S. economy by:Tariffs can help the U.S. economy by:

Regulating tradeRegulating trade Retaliating against tariffs placed by foreign countries Retaliating against tariffs placed by foreign countries

on U.S. goodson U.S. goods Protecting American industries against foreign Protecting American industries against foreign

competitioncompetition Raising prices on foreign goodsRaising prices on foreign goods




Question: What are the differences between progressive and regressive taxes?

SECTION 2

takes a larger percentage of income from higher-income groups.

takes a larger percentage of income from lower-income groups.

PROGRESSIVE TAX

REGRESSIVE TAX



The Main Idea

The federal, state and local governments collect and spend many billions of dollars each year. Each level of government has systems to manage public funds.

Reading Focus How do governments collect public money? What steps are involved in spending public money? How do governments account for your money?




Monetary Policy [02:46] Monetary Policy [02:46]



How governments collect public money:How governments collect public money:

Internal Revenue ServiceInternal Revenue Service——collects federal collects federal taxestaxes

U.S. Customs ServiceU.S. Customs Service——collects taxes on collects taxes on imported goodsimported goods

State and local governments collect taxes State and local governments collect taxes through their own collection agencies.through their own collection agencies.




Steps in creating the federal budget:Steps in creating the federal budget: Office of Management and Budget and the president Office of Management and Budget and the president

prepare the budget.prepare the budget. The prepared budget is published and sent to The prepared budget is published and sent to

Congress for study.Congress for study. Congress debates the budget and makes changes.Congress debates the budget and makes changes. Both houses must approve the budget.Both houses must approve the budget. The budget is passed with 13 The budget is passed with 13 appropriationsappropriations billsbills.. Bills are sent to the president for approval or veto.Bills are sent to the president for approval or veto.




The National DebtThe National Debt 19701970––19971997——The government spent more than it The government spent more than it

collected.collected. Money was borrowed to make up the difference.Money was borrowed to make up the difference. Interest on the borrowed money increases the debt.Interest on the borrowed money increases the debt. Government bonds used to borrow money are being Government bonds used to borrow money are being

bought by foreign investors.bought by foreign investors. Clinton plan for balanced budget in 2002 was Clinton plan for balanced budget in 2002 was

thwarted by recession and terrorism.thwarted by recession and terrorism.




Question: How do governments collect public money?

SECTION 3

Government Collection of Public MoneyGovernment Collection of Public MoneyGovernment Collection of Public Money

Federal “collection agency”Federal “collection agency”

Role of the “collection agency”Role of the “collection agency”

State and local “collection agencies”State and local “collection agencies”

Internal Revenue Service

collects individual income taxes, corporate income taxes, Social Security taxes, excise taxes, estate taxes, and gift taxes

collects state income and inheritance taxes as well as local property taxes



Chapter 12 Wrap-Up

1. Identify six reasons for the high cost of government.2. Identify and explain the principles the government

uses to try to make taxation fair.3. Why must governments borrow money? How do they

borrow money?4. How is individual income tax calculated, and how do

citizens pay individual income taxes?5. What is the difference between a progressive tax and a

regressive tax, and what is an example of each?6. What is the difference between a surplus and a deficit?7. What is the national debt, and how might it be harmful

to the country?

1. Identify six reasons for the high cost of government.2. Identify and explain the principles the government

uses to try to make taxation fair.3. Why must governments borrow money? How do they

borrow money?4. How is individual income tax calculated, and how do

citizens pay individual income taxes?5. What is the difference between a progressive tax and a

regressive tax, and what is an example of each?6. What is the difference between a surplus and a deficit?7. What is the national debt, and how might it be harmful

to the country?

Documents

Chapter 12 Paying for Government