Aim: How does money work? Do Now: V.Finkelshteyn Staten Island Tech HS – Economics Money/Tax What makes a $100 bill worth $100? A $100 bill is an example.

Aim: How does money work?

Do Now:

V.FinkelshteynV.Finkelshteyn Staten Island Tech HS – Economics Staten Island Tech HS – Economics Money/Tax Money/Tax

What makes a $100 bill worth $100?

A $100 bill is an example of fiat money and it has worth because the government has declared that it does. It works as money because it is durable, portable, divisible, uniform, scarce, and accepted by all

MoneyMoney

Medium of Exchange used to determine value during the exchange of goods and services

Unit of account that provides a means for comparing the values of goods and services

Store value – money keeps its value if you decide to hold on to it instead of spending it

Characteristics of Money – Currency (paper & Characteristics of Money – Currency (paper & coins)coins)

DurabilityDurability PortabilityPortability DivisibilityDivisibility UniformityUniformity Limited SupplyLimited Supply

AcceptabilityAcceptability

IncomeIncome

Employment Earnings

Rent Earnings

Investment Earnings

Gifts/Inheritance Earnings

Wages and Salary

BonusesHOW MUCH OF THIS IS TAXABLE INCOME?ALL INCOME IS TAXABLE

Income DeductionsIncome Deductions• What gets taken out of your paycheck?

– Federal Income Tax– State Income Tax– Local Income Tax– Social Security– Medicare– Union Fees– Health Insurance– Retirements contributions– Alimony Payments

Tax StructuresTax Structures• ProportionalProportional – constant percentage of

income is taken in taxes as income increases (Flat tax)

• ProgressiveProgressive – a larger percentage of income is taken in taxes as income increases (Income tax)

• RegressiveRegressive – a smaller percentage of income is taken in taxes as income increases (sales tax)

Tax BracketsTax Brackets• In the United States we have what is called a “progressive

income tax,” - as your taxable income rises, additional income is taxed at higher rates.

• A person with a taxable income of less than $8025 in 2010 will pay 10% of their income in taxes.

• Those who make more than $8025 will pay 10% on that income ($802.50) plus a higher rate for all income over that amount. We say the person is in the 10% tax bracket until their income rises above that $8025 level, at which point they move into a higher tax bracket.

• The tax rate rises to a maximum of 35% on income in excess of $357,700 (the person is then in the 35% tax bracket).

25,000

50,000

75,000

100,000

15% 15%

25%

15%

25%

30%

15% of 25,000 = 3,750 Total Tax = $23,750

25% of 50, 000 = 12,500

30% of 25,000 = 7,500

Progressive Income Tax ModelProgressive Income Tax Model

Tax Bracket Single Married Filing Jointly

10% Bracket $0 – $8,375 $0 – $16,750

15% Bracket $8,375 – $34,000 $16,750 – $68,000

25% Bracket $34,000 – $82,400 $68,000 – $137,300

28% Bracket $82,400 – $171,850 $137,300 – $209,250

33% Bracket $171,850 – $373,650 $209,250 – $373,650

35% Bracket $373,650+ $373,650+

IRS – Income Tax Bracket for 2010IRS – Internal Revenue Service

State Income Tax State Income Tax BracketsBrackets

New York   

$0 - $8,000 4.00% $0 - $16,000 4.00%

$8,001 - $11,000 4.50% $16,001 - $22,000 4.50%

$11,001 - $13,000 5.25% $22,001 - $26,000 5.25%

$13,001 - $20,000 5.90% $26,001 - $40,000 5.90%

$20,001 - $200,000 6.85% $40,001 - $300,000 6.85%

$200,001 - $500,000 7.85% $300,001 - $500,000 7.85%

$500,001 + 8.97% $500,001 + 8.97%

What are tax rates for New York City?

What is a Tax Refund?• An amount that the government gives back to a taxpayer who has paid more taxes that were due

• Federal and state taxes are withheld at a specified amount each pay period, and when the year ends, each tax payer must file income taxes by submitting the proper filing forms. In many cases, people have paid more than they were required to pay. When the federal government or state treasurer receives the tax forms, they issue checks for overpayment. This is a tax refund.

When are Taxes Due?When are Taxes Due?

April 15April 15thth

Matching TermsMatching Terms1. Regressive tax

2. Proportional tax

3. Individual income tax

4. Deductions

5. Withholding

6. Commodity money

7. Federal Reserve System

8. Fiat money

9. Interest

10. Principal

11. Representative money

12. Default

A. Failure to pay back a loan

B. Objects that have value because the holder can exchange them for something else of value

C. A tax for which the percentage of income paid in taxes decreases as income increases

D. Variable amounts that you can subtract from your gross income

E. The central banking system of the United States

F. A tax for which the percentage of income paid in taxes remains the same for all income levels

G. Taking tax payments out of an employee’s pay before he/she receives it

H. The amount of money borrowed

I. A tax on the amount of money a person earns

J. The price paid for the use of borrowed money

K. Objects that have value in themselves and that are also used as money

L. Money that has value because the government has ordered that it is an acceptable means of payment

Start of Yr Principal $ Interest 5% End of Yr $

- 100 5 105

1 105 5.25 110.25

2 110.25 5.51 115.76

3 115.76 5.79 121.55

4 121.55 6.08 127.63

5 127.63 6.388 134.01

6 134.01 6.70 140.71

7 140.71 7.04 147.75

8 147.75 7.39 155.14

9 155.14 7.76 162.90

10 162.90 8.14 171.04

11 171.04 8.55 179.59

12 179.59 8.98 188.57

Compound Interest on savingsCompound Interest on savings