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Taxes & Government Spending. Chapter 14. What are Taxes?. http://www.youtube.com/watch?v=POjRqJDvAjk&feature=related. - PowerPoint PPT Presentation
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Taxes & Government Spending
Chapter 14
What are Taxes? Taxes are required
payments to local, state or national governments
Revenue – income received by the gov’t from taxes
Article I, Section 8 grants the government the right to taxhttp://www.youtube.com/watch?v=POjRqJDvAjk&feature
=related
Limits on the Power to Tax
Taxes cannot be for individual interests.
Taxes must be the same in all states.
Exports cannot be taxed. 16th amendment legalized income
taxes.
Tax Base & Tax Structure Tax base – income, property, good, or that
is subject to a tax Individual income tax –
earnings
Sales tax – dollar value of a good or service being sold
Property Tax – value of property
Corporate Income Tax – value of a company’s profits
Types of Taxes Proportional tax-
percentage of income paid in taxes remains the same for all income levels.
Progressive tax – taxes increase as income increases
Regressive tax – taxes decrease as income increases
Characteristics Simplicity– simple and
easily understood Efficiency – able to
collect without spending too much time or money
Certainty – tax is due, no matter what
Equity – tax system should be fair
http://www.youtube.com/user/mjmfoodie#p/u/17/lafDykKJ_9I
Federal Taxes During 2011, the
federal gov’t took in about $2.16 trillion in taxes.
http://www.pagetutor.com/trillion/index.html
• Yet it spends nearly $3.45 trillion Tax withholding – taking payments out
of your check before you receive it. Tax return – form used to file income
taxes. Taxable income – person’s gross
income minus exemptions (salaries, wages, tips)
Are Write Offs Right On? Personal exemptions – set
amounts that are insulated from taxation• Spouses & dependants lower one’s income
Deductions – items
you can subtract from taxable income• interest on a mortgage, charitable donations, business expenses
Where do Taxes Go? FICA – Federal Insurance
Contributions Act • funds Social Security and Medicare• Brought in $806 billion, federally, last year in
revenue Social Security – retirement, surviving
family members, disabled Medicare – health care for people over
65 Unemployment taxes – insurance
policies for workers• laid off can file, must be actively seeking work
http://www.wheredidmytaxdollarsgo.com/
Other Taxes Excise taxes – alcohol, gasoline, cable tv,
phone etc. Estate taxes – tax on the property of
someone who has died (no tax for less than 1.5 million)
Gift taxes – tax on a gift given- only over $10,000 per year
Import taxes – imported goods Tax incentive – used to encourage or
discourage behavior.
Debt vs. Deficit A surplus occurs when the
government takes in money more than it spends
A deficit occurs when the government spends more money than it raises in revenue
All the money the government has borrowed over the years is referred to as the national debt
http://www.youtube.com/watch?v=lcb0hMPG5S0
Federal Spending Mandatory spending – money
that is required to be spent by law• Entitlements: Medicare, Medicaid
Discretionary spending – optional spending which can be altered through appropriations acts• bills must pass each year to continue spending in these categories: agriculture, commerce, defense, energy, homeland security, interior, financial services, labor health and education, transportation…
Entitlement Programs Entitlements are social welfare
programs that people are entitled to if they meet certain requirements.
Entitlements account for nearly 50% of the budget• Social Security – OASD• Medicare – health care for elderly
• Medicaid – health care for low-income families
State and Local Taxes Most taxes go to
funding an Operating budget – which pays for day to day expenses: • salaries, supplies, keeping the lights on, etc.
Balanced budget – revenues must equal spending• Only VT doesn’t require a balanced budget
http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid
Where is the Money Going?
Education – public schools and colleges
Public Safety – police, fire, prisons, etc
Highways/Transportation – roads, bridges, facilities, airports, etc.
Public Welfare – health departments, etc.
Recreations – parks, nature reserves
Administration – courts, legislature
State Revenue Other monies go to capital
budgets, or large investments or building projects
For the most part states receive revenue from sales taxes• Although property,
income, transfer, corporate and inheritance taxes are also included