Taxes 2016

• “ In this world, nothing can be said to be certain, except death and taxes.” Benjamin Franklin

• “Death and taxes may be certain, but we don’t have to die every year.” anonymous

Taxes?

• What types/kind of taxes do American pay?

What are Taxes Used for…?

Financing Government• Objectives: SWBAT - • Understand how the Federal Government raises

money• Differentiate between the various types of

federal/state/local taxes• Determine why the government must borrow

money• Discover how the federal Government spends

money• Explain how the President and Congress

prepare the federal budget

The Power to Tax

• Congress uses this power to pay for government’s expenses

• Regulate things government thinks are dangerous

Individual/Personal Income Tax

• Tax on “earnings”• Direct tax• Progressive tax• Brings in the largest amount of $ to the

federal gov’t

Tax Chart 2015

Tax Return

• April 15th

• Income – W2 form, interest – 1099, Winnings, profit from sale, gifts, etc.

• Exemptions - credits for certain people• Deductions – expenses not taxed,

charities, interest in mortgages• IRS – processes tax returns

Corporate Income Tax

• Tax on business profits• Progressive tax• Non profit organizations and charities are

not taxed

Social Insurances taxes

• Three important programs– Social Security– Medicare– Unemployment– Paid by both employer and employee– Regressive taxes – same rate

Excise Taxes

• Indirect tax the gov’t puts on the making, selling , or using of certain goods and services

• Gas, telephone services, cable, beer• Tax built into the price

Estate and Gift Taxes

• Estate – on the property and $ of a person who has died

• Gift – a tax on gifts over 14,000

Custom Duties

• Taxes on goods brought in to this country• Tax on goods above a certain threshold

Sales Taxes

• taxes placed on the sale or lease of goods and services in the United States.– Can be

» National» State » Local

» Pa 6%» Phila 2%

Non Revenue Taxes

• To regulate harmful activities• “Sin taxes” (alcohol, cigarettes, smokeless

tobacco, gas guzzlers)

Non-Tax Revenue and Borrowing

• Fees for passports, court fines, sale of property, etc.

• Borrow to cover additional costs– Wars, big projects, pay deficit

Public Debt• Also called the national debt

– Amount borrowed but not yet paid back– Includes interest– Deficit spending – borrowing to meet

expenses

Debt Clock

Spending and the Budget

• Budget – plan for income and expenses– Entitlement programs – paying to people who

meet certain requirements• Largest area of spending• Social Security. Medicare, food stamps,

unemployment– Interest on national debt– Defenses spending

Controllable vs. UncontrollableSpending

• Controllable – Congress and the President can raise or lower

• Uncontrollable – gov’t must spend because it promised it will do so. (Entitlements – Social Security, welfare)

• Most government spending is uncontrollable

Federal Budget

• Government’s yearly plan for spending• President and Congress work on the

budget• President and OMB (Office of

Management and the Budget) put budget together

• Congress studies and decides on spending limits

What Happens When The Costs of Government Exceed Revenue?

• 1.?

• 2.?

• 3?

What Happens When The Costs of Government Exceed Revenue?

• 1. Cut expenses; cut government programs; cut spending

• 2.?

• 3?

What Happens When The Costs of Government Exceed Revenue?

• 1. Cut expenses; cut government programs; cut spending

• 2. Raise taxes

• 3?

What Happens When The Costs of Government Exceed Revenue?

• 1. Cut expenses; cut government programs; cut spending

• 2. Raise taxes

• 3. Borrow more money let future generations pay back