Taxes:. The Power to Tax: Recall, the Constitution give Congress the power to tax in order to raise the money needed to fund the Federal Government. 4.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Slide 1
Taxes:
Slide 2
The Power to Tax: Recall, the Constitution give Congress the
power to tax in order to raise the money needed to fund the Federal
Government. 4 Constitutional limitations: (expressed) 1. only be
levied for common defense and general welfare. 2. cannot tax
exports (Commerce Compromise) 3. direct taxes must be evenly
distributed among the States. 4. all indirect taxes must be levied
at the same rate.
Slide 3
Implied Limitations: -The Federal Government cannot tax States
or local governments in the exercise of their governmental
functions. (ex:) providing education, building streets and
highways.
Slide 4
Tax Base and Tax Structures: A tax base is the income,
property, good, or service that is subject to a tax. (ex:)
individual income tax, sales tax, property tax, corporate income
tax. When policymakers create a new tax, they first decide what the
base will be for the tax: income, sales, propertyetc. Next, the
government decides how to structure the tax on that particular
base. (ex:) Proportional, Progressive, or Regressive
Slide 5
Proportional (flat) Tax: tax rate is the same for all income
levels. Proportional or flat taxes are often seen as a fair way to
levy taxes, because everyone pays the same rate. But is it really
fair? (ex:) 10% proportional tax on incomes. - Cashier at Wal-Mart
makes $20,000, taxes = $2,000 - Doctor makes $200,000, taxes =
$20,000 Although individuals are taxed at the same rate, flat taxes
can be considered regressive.
Slide 6
Regressive Tax: Percentage of income paid in taxes goes down as
income increases. (ex:) Sale tax Rons Taxes on $50,000 Marys taxes
on $150,000 Total sales taxes paid = $5,000 10% of incomeAround
3%
Slide 7
Progressive Tax: Higher the income, the higher percentage of
income is paid. (ex:) Federal income tax
Slide 8
Current Federal Taxes: Income Taxes- authorized by the 16 th
Amendment, in 1913. -Largest source of federal revenue ( 2010 =
$2.2 trillion) -Progressive (more you make, more you pay.)
Corporate Income Tax- Each corporation must pay a tax on its net
income. - Nonprofit organizations, churches, and charitable
foundations are not subject to corporate taxes - Corporate tax
rates: *15% on first $50,000 *35% on more than $10 million.
Slide 9
Social Insurance Taxes: The Federal Government collects huge
sums of money to finance three major social welfare programs. 1.)
Social Security 2.) Medicare- health insurance for the elderly. 3.)
Unemployment Compensation Both Social Security and Medicare are
imposed on nearly all employers and their employees. Both are
payroll taxes, which means they are withheld from their
paychecks.
Slide 10
Excise Taxes: An excise tax is tax laid on the manufacture,
sale, or consumption of goods and/or services. (ex:) gasoline, oil,
tires, tobacco, liquor, beer, firearms, telephone service. Excise
taxes are often called -hidden taxes, because retailers figure them
into their prices. -luxury taxes, because they are imposed on goods
not considered to be necessities. - Sin taxes, because some are
laid on wine, liquor, cigarettes, and gambling.
Slide 11
Customs Duties: Customs duties are taxes laid on goods brought
into the United States from abroad. (also known as tariffs, import
duties, or imposts. Congress decides which items will be dutied,
and at what rate. Over 30,000 items have duties placed on them.
(Bibles, coffee, and up to $800 of a tourist purchases are exempt.)
Customs duties were the first major source of income for the
Federal Government for more than a century. -now makes up 1% of
total government revenue.
Slide 12
Taxing for Nonrevenue Purposes: The power to tax is often used
for other purposes than raising revenue. Can also be used to
discourage some activity that Congress thinks is harmful or
dangerous to the public. (ex:) narcotics, firearms, excise tax on
gas-guzzling cars. Court first upheld taxing for non-revenue
purposes in Veazie Bank v. Fenno in 1869 1912, Congress used its
taxing power to destroy a part of the domestic match industry.
Slide 13
Bell Work: 3/13/12 Explain the implied limitation on the power
to tax.
Slide 14
16.2 Nontax Revenues and Borrowing:
Slide 15
Nontax Revenues: The government makes a large sum of money each
year (upwards of 50 billion) from non-tax sources. Examples of
these sources Interest on federal loans, canal tolls, passports,
copyrights, patents, sale of public lands, federal court fines,
national park fees, unused stamps, etc. Seigniorage = The amount of
profit that the U.S. mint makes in the production of coins (cost of
metals and production compared to the value of the coin). About $2
billion in most years.
Slide 16
BORROWING: Article 1 Section 8 of the Constitution states that
Congress has the power to borrow money on the credit of the U.S.
The government will usually borrow money for two reasons: 1. Meet
the costs of a crisis (war, terrorism, etc.) 2. Finance a
large-scale projects that cannot be met by current government
income. In recent times, the government borrows money to overcome
the budget deficit. ~ Deficit = The yearly shortfall between
revenue and spending (basically spending more than you are making).
~ Surplus = The amount of money leftover at the end of the fiscal
year.
Slide 17
Public Debt: The current public debt is nearing 15 trillion
dollars. ~ Public Debt = The governments outstanding indebtedness,
all of the money borrowed and not yet repaid, plus the accrued
interest. There is no constitutional limit on the amount of money
that can be borrowed, so there is no limit on public debt. -
recall, Congress did establish a debt ceiling, but raise it
whenever they need to borrow more money.
Slide 18
In 2007, interest on the debt alone was $235 billion.
-approximately one in every ten dollars the Federal Government now
spends goes to service the debt. So where does the money go?
Slide 19
Bell Work: 3/14/12 List the three reasons why the government
borrows money. 1. Meet the cost of a crisis 2. Large scale projects
3. Overcome budget deficits
Slide 20
16.3 Spending and the Budget:
Slide 21
Federal Spending: For more than half of our nations history,
independence to the mid-1930s, the Governments income and spending
were both small. That changed dramatically during the Great
Depression and then WWII. Today, the Federal Government take
billions of dollars from one segment of the national economy, then
pumps those billions back into other segments of the economy.
Slide 22
Federal Government ConsumersBanksBusinesses Taxes Savings Loans
Govt Spending
Slide 23
Spending Priorities: What the Federal Government spends can be
described in terms of discretionary (controllable), and mandatory
(uncontrollable) spending Mandatory spending: refers to money that
lawmakers are required to spend in certain areas. (entitlements)
-Entitlements are social welfare programs that people are entitled
to if they meet a certain criteria. (ex:) 1. social security 2.
interest on the national debt 3. Medicare 4. Medicaid 5. benefits
for federal employees.
Slide 24
These entitlements take up most (80%) the Federal Governments
spending, and in the future, these cost will continue to increase.
Mandatory (uncontrollable) spending takes up the majority of the
governments yearly budget.
Slide 25
Discretionary spending: refers to government spending in which
choices can be made in regard to the amount of money spent.
Discretionary spending is divided among a wide variety of other
categories: 1. defense6. disaster aid 2. education7. foreign aid 3.
scientific research8.farm subsidies 4. law enforcement9.
transportation 5. national parks 10. environmental cleanup Also
pays salaries of federal workers.
Slide 26
The Federal Budget: The Constitution gives Congress the power
of the purse. However, it is the President who initiates the
process by proposing a budget. (Occurs shortly after Congress
begins their yearly sessions. In essence, the budget making process
is a joint- effort by the President and both houses.
Slide 27
The President and the Budget: The process of building a budget
is very lengthy. -begins 18 months before the start of the fiscal
year. Budget Process: 1. Each federal agency prepares detailed
estimates of its spending needs for the upcoming year. 2. Those
reports get sent to the Presidents budget making agency, the Office
of Management and Budget. (OMB) 3. OMB reviews all of the budget
proposals, and holds hearings. (usually lowers spending plans) 4.
OMB put all of the information into a document, then the President
sends it to Congress.
Slide 28
Slide 29
Congress and the Budget: Once Congress receives the Presidents
Budget: 1. Both the House and the Senate form a standing committee
to review the budget proposal. 2. Those committees then study and
dissect the budget proposal with the help of the Congressional
Budget Office. (CBO) 3. The information the CBO supplies is
independent of the information provided by the OMB. 4. Presidents
budget is also sent to the House and Senate Appropriation
subcommittees, which hold hearings, and take testimony from a wide
range of groups.
Slide 30
Lobbyists for most of the interest groups are actively involved
in those hearings. -They testify, bring grassroots pressure, and
otherwise work to promote the organization they represent. (ex:)
National Federation of Teachers (NFT), UAW Campaign contributions
often find their way to members of those subcommittees.
(crooks!)
Slide 31
Passing the Budget: The budget must be finalized by October 1
st, the beginning of the fiscal year. -This usually never happens.
-Congress must then pass emergency spending legislation, continuing
resolution, to avoid a government shutdown. (ex:) Government
shutdown of 1995 When the continuing resolution is signed by the
President, the government will continue to fund federal agencies
based on last years budget.
Slide 32
Bell Work: 3/15/12 Explain the difference between mandatory and
discretionary Spending.
Slide 33
16.4 State and Local Taxes and Spending:
Slide 34
State Budgets: The federal government has one budget that
covers all kinds of spending. States have two budgets: operating
budgets and capital budgets. Operating budget: pays for day-to-day
expenses. (ex:) State employees salaries, supplies, and maintenance
of state facilities. Capital Budget: pays for major capital, or
investment spending. (ex:) Building a new building or bridge.
Slide 35
Balancing State Budgets: In most states, the governor prepares
the budget with the help of a budget agency. The legislature then
discusses and eventually approves the budget. Unlike the federal
government, states have laws the require a balanced budget. -These
laws apply to the operating budget only. - Laws vary in stringency
from state to state. (ex:) Some require a budget being proposed to
be balanced, while others require policy makers to maintain a
balanced budget.
Slide 36
Where are State Taxes Spent?: Spending policies differ from
state to state. In general, states spend the largest amount of
their revenue on the following three categories: 1. Education 2.
Highways 3. Public welfare Other expenditures include: - public
safety (police, prisons) - Arts and recreation (state parks) -
Administration (salaries, legislature, and the courts)
Slide 37
State Tax Revenues: Sales taxes: The main source of revenue for
state governments. -all but a few of the 50 states collect sales
taxes. -In every state, some things are not taxed. (food) State
income taxes: Income taxes are another large contributor to many
states budgets. - People pay these income taxes on top of federal
income taxes. - either proportional or progressive. Corporate
income taxes: Taxes place on the profits of a corporation. (either
proportional or progressive)
Slide 38
Business taxes: besides corporate income tax, businesses pay a
variety of other state taxes. -licensing fees -transfer tax Other
State Taxes: - inheritance tax -real property (land, buildings, or
real estate) -personal property (bank accounts)
Slide 39
Local Government Spending and Revenue: Your local government
plays a part in many aspects of everyday life. - schools, build
roads, libraries, hospitals and jails. All units of local
governments are created by the state government. The State gives
them their powers and authority. - Today there are more than 87,000
local government units in the U.S. - Together, they collect nearly
$300 billion in tax revenue
Slide 40
Jobs of Government: Local governments carry major
responsibilities in these areas: - Public school system - Law
enforcement - Fire protection - Parks/recreation facilities -
Public health (restaurant inspectors) - Elections - Record keeping
(birth/death certificates, wills) - Social services (food stamps,
welfare)
Slide 41
Local Revenue: Property taxes: the main source of tax revenue
levied by local governments -paid by people who own real estate,
buildings, or land. -An official called a tax assessor determines
the value of the property. - in most states, property tax is the
main source of funding for schools. Other local taxes: -sale tax,
excise taxes, income taxes, -some large cities collect income taxes
as payroll taxes.
Slide 42
16.4 Questions (add to your page) 1. Describe the difference a
states operating budget and its capital budget. 2. What is a
balanced budget? 3.What are the main sources of state revenue?
Slide 43
Bell Work: 3-20-12 The Federal Government collects large sums
of money that go toward 3 social welfare programs, what are those 3
programs? 1. 2. 3.