income taxes? Take the survey & discuss your answers. Everyone - - PowerPoint PPT Presentation

Which is the fairest way for income taxes?

Take the survey & discuss your answers.

 Everyone pays the same percentage.  Those with higher incomes pay a higher percentage.  Have no income tax & raise money another way.

Chapter 12– Taxes and Taxation

https://unitenews.wordpress.com/20 12/07/

Republican political cartoon on taxes:

Democratic political cartoon on taxes:

What are “Good Taxes”?

According to Adam Smith:

 Simple to understand  Avoid negative

incentives

 Avoid loopholes  Equity-fairness  Convenience &

Efficiency

Essential Questions

 Why & how does the

government redistribute income?

 How do regressive,

progressive, and proportional taxes affect redistribution

• f income?

• The government redistributes income
• through different tax rate structures & creates a safety net

that helps alleviates poverty & support social services

• Regressive, progressive, and proportional taxes decide
• the amount of taxes an individual must pay

The Main Ideas

Where Does the Money Come From?

Federal Government Income Broken Down

What Public Goods Does the Money Buy?

Federal Government Spending Broken Down

Where Does State Money Come From?

State Income Broken Down

What Public Goods Does the Money Buy?

State Government Spending Broken Down

What do other countries do for taxes?

“Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, Andorra and the United Arab Emirates (UAE).” Investopedia.com

What % do other countries take for taxes?

Why Do We Pay Taxes?

So that the governments can…

• Pay for goods

the general public uses

• Pay for services

the general public uses

Progressive, Regressive, and Proportional Taxes

Progressive Tax: As income increases, tax percentage increases

 Example) Income of $20,000 pays 15%, vs. income of

$100,000 pays 25% Regressive Tax: As income increases, tax percentage decreases

 Example) You can more easily afford to pay sales taxes with

a higher income Proportional Tax: Regardless of income, tax percentage remains the same

 Example) Everyone pays 10% at all income levels

Federal vs. State/Local Taxes

FEDERAL INFORMATION

• Most income from

– Income taxes – Payroll taxes

• Social security taxes
• Medicare taxes
• Unemployment taxes
• Income pays for

– Military defense – Highways and roads – Other gov’t programs STATE/LOCAL INFORMATION

• Most income from

– Sales taxes

• Income & Property taxes
• Grants from Fed. gov’t
• Income pays for
• Education
• Public Welfare
• Roads and repairs
• Public Safety
• Police and Fire

Types of Taxes Income Taxes

Income Taxes

• Are charged Federally and by the State

– Rates are much different

• Federal Income Rate is much higher than the State
• Charged against individuals and corporations
• Usually considered a “progressive tax”

– Federal rates get higher as income increases & so do most state rates

Types of Taxes – Payroll Taxes

• These are the other things taken from your paycheck each time
• FICA – Federal Insurance Contributions Act

– Also known as Social Security – Created to make sure people were “secure” when they were no longer in the workforce (1935)

• Followed the financial issues of the 20’s
• This is a regressive tax
• Medicare Tax

– Additional tax to help alleviate medical costs to government when people are unable to pay bills themselves

• This is a proportional tax

Types of Taxes – Transaction and Property Taxes

• Sales Tax
• Percentage charged upon the purchase of certain items
• This is a regressive tax – poorer people pay more.
• Real Estate Tax
• Percentage charged on the value of land owned
• This is a proportional tax.
• Personal Property Tax
• Percentage charged on all large personal items
• Examples: Cars, Boats, Trucks, RVs, etc.
• This is a proportional tax.

Possible Additional Taxes

• Localities may opt to charge additional fees.
• Registration fees – proportional tax usually
• Licensure fees – proportional tax usually
• Additional sales tax fees -regressive taxes
• Gas taxes or transportation taxes-regressive taxes
• Excise taxes – taxes to try to stop a behavior
• Additional taxes on cigarettes and alcohol

✓ Goal is to make them too expensive for people to buy

• These are regressive taxes.

How much money you want to be earning (per year) when you are 30? What percentage do you think that income has to pay to the government in taxes (in the US)?

In reality…



US Federal Tax Rates: (only 3 % of Americans make over $250,000)



Add 10 -15 % more depending on which state you work in

Income Tax in USA

 IRS – tax collection agency in USA  Taxes are deducted throughout year  Every citizen must file every year by:  If you paid more during the year then you need to:

you get a refund

 If you paid less during the year then you need to:

pay the difference

What Are Tax Deductions & Loopholes?

Tax Deduction – reduction of your taxable income

• Lowers the overall amount (base) you will be charged a

tax on

• Examples: local taxes paid, student loans,

charitable contributions, home mortgage interest

• These are deducted b/c they were already paid

to a gov’t agency or charity

Tax Loophole- A provision in the laws governing taxation that allows people to reduce their taxes.

• Tax incentives
• “write offs”

What are tax credits?

Tax Credit – reduces the actual tax

• Government encourages public to purchase specific

products for the benefit to the general public

• Example: Hybrid cars, energy efficient

windows/appliances

• Helps in reducing other bills for government

long term

https://smartasset.com/taxes/virginia- tax-calculator

What does the Federal & State Governments take out

• f my pay?