Post on 19-Dec-2015
Lecture #17: Taxes
“The hardest thing in the world to
understand is the income tax”
~Albert Einstein
Now it is time to watch a video clip on Taxes!!!
Click on the link below: http://www.brainpop.com/socialstudies/economics/taxes/ User ID: FSUSD Password: School Make sure you view in Full Screen Make sure the computer speakers are on!
•American Revolution caused debt
The Power to Collect Taxes
•Tax was necessary to pay debt
•Article 1, Section 8 of the U.S. Constitutiongranted Congress power to tax
You do not need to copy this slide into your notes!
Federal Taxes
1. Personal Income Tax—a tax people pay on their income
• Paid to federal & most state govts
2. Corporate Income Tax—a tax corporations pay on their profits
• Paid to federal & most state govts
3. Social Security Tax—a tax paid to the federal govt on income generated from employment
• ½ paid by employers & ½ paid by employees
Remember when taking
Cornell Notes you need to come up
with at least 3 questions per page!
Three Major Federal Taxes
44% comes from
Personal Income Tax
Where the Money Comes From—
for each dollar the Federal Government raises from taxes!
10.3% comes from Corporate Income Tax
38% comes from Social Security tax
7.7% comes from other federal taxes
2005 data
You do not need to copy this slide into your notes!
The Federal Government Dollar- Where It Goes
Homeland Security
1%
Medicare, andother Retirement
32%
DOD Military19%
Social Security21%
Other19%
Net Interest onthe Debt
7%
Other Taxes
1. Sales Tax—applied to the purchase of many goods
• Collected by states only—varies among states
2. Excise Taxes—placed on the purchase of certain goods—such as tobacco & gas
• Collected by the federal govt & many states
3. Property Tax—homeowners pay a tax on the value of their property
• Major revenue source for state & local govts
Three Other Taxes
The State Dollar-Where It Comes From
All Other10%
Motor Fuel Sales Tax
4%
Property Tax32%
General Sales Tax &Gross Receipts
25%
Individual Income Tax22%
Alcoholic Beverages Sales Tax
1%
Tobacco Product Sales Tax
1%
Motor Vehicle License2%
Corporate Income Tax3%
You do not need to copy this slide into your notes!
The State Dollar-Where It Goes
Social Services 21%
Government Administrative
4%
Education30%
Utility Expenditure7%
Transportation 7%
Interest on General Debt
4% Public Safety
8% Environment and
Housing7%
General Expenditure
5%
Insurance Trust Expenditure
7%
You do not need to copy this slide into your notes!
AMT • AMT—a tax that some people have to pay on top of their regular income tax
• A minimum tax is computed for a given income—if you make that income & pay at least that amount of taxes you don’t pay the AMT. If you pay less than that amount in taxes—you pay the AMT amount.
• Created in 1969 to prevent persons w/high incomes from paying little or no taxes b/c of tax write-offs.
• 1969 only 1% of the population paid AMT, today over 3% pay this tax.
• In 2006, the income was $67,890 for a person filing jointly w/2 children.
The Alternative Minimum Tax
Taxes • Proportional Taxes—everyone pays at the same rate, whatever their income level.
• A.K.A. Flat tax
• Progressive Income Tax—people pay higher rates as their income rise.
• Usually capped. • The U.S. has a progressive income tax
structure. • In 2005, tax rates were 10, 15, 25, 28, 33 & 35
percent
• Regressive Income Tax—tax rate that decreases as income levels rise.
Proportional, Progressive & Regressive Income Taxes
Countries with a flat tax structure
Country Rate Year Introduced
Estonia 26% 1994
Lithuania 33 1994
Latvia 25 1995
Russia 13 2001
Serbia 14 2003
Ukraine 13 2004
Slovakia 19 2004
Georgia 12 2005
Romania 16 2005
For your information
You do not need to
write this down!
Tax Brackets
U.S. Tax Brackets - 2006
Single Taxpayer Rate
$0-$7,550 10%
$7,551-$30,650 15%
$30,650-$74,200 25%
$74,201-$154,800 28%
$154,801-$336,550 33%
$336,551-and above 35%
You do not need to copy this slide into your notes!
Who Pays the Most Tax in the United States?
Income GroupIncome Split
PointGroup’s share of total U.S. income
Group’s share of federal income
taxes
Top 1% Above $285,424 16.12% 33.71%
Top 5% Above $126,525 30.55% 53.80%
Top 10% Above $92,663 41.77% 65.73%
Top 25% Above $56,401 64.37% 83.90%
Top 50% Above $28,654 85.77% 96.50%
Bottom 50% Below $28,654 14.23% 3.50%
Source: IRS 2003 For your information.You do not need to write this down!
The following slides are about the IRS & Filing taxes!
You do not need to write down this information in your notebooks.
This information will help you with Part 6 of your Game of Life project!
Voluntary Compliance
•Keep necessary records
•Report income accurately
•Correctly calculate tax liability
•File returnson time
Pay-As-You-Go Withholding
•Taxes are paid as income is earned
•Taxes are withheld based on Form W-4 information
Financial Record Keeping
Save:
•Paycheck stubs
•Bank statements
•Completed tax returns and forms
•Warranty information
•Receipts
•Credit card statements
Store items in:
Financial Record Keeping
•Envelopes or accordion file
•Filing cabinets
•Computer
•Safety deposit boxes
Methods of Electronic Tax Preparation and Transmission
•Telefile
•Personal Computer
•Tax Professional
HOURS AND EARNINGS
Hours Earnings
TAXES AND DEDUCTIONS
Description Amount
20 200.00 FICA
Federal
State
City
Total Taxes
15.20
10.25
5.10
1.00
31.55
TOTAL
Taxable Wages
200.00
Less Taxes
31.55
Net Pay
168.45
Exemptions are set amounts that you subtract from your gross income for yourself, your spouse, and any dependents.
Deductions are variable amounts that you can subtract from your gross income.
Filing a Tax Return
A tax return is a form on which you declare your income to the government and determine your taxable income.
Taxable income is a person’s total (or gross) income minus exemptions and deductions.
You do not need to copy this slide into your notes!
Review—True or False
1. There are 5 major taxes at the federal government level.
2. The federal government and some states apply an excise tax on some items.
3. The alternative minimum tax is a tax that everyone pays on top of their regular income tax.
4. With a proportional income tax, everyone pays at the same rate.
Review—True or False
1. There are 5 major taxes at the federal government level. FALSE
2. The federal government and some states apply an excise tax on some items.
TRUE
3. The alternative minimum tax is a tax that everyone pays on top of their regular income tax.
FALSE
4. With a proportional income tax, everyone pays at the same rate.
TRUE