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Ch 14 Taxes and Government Spending

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Sec 1 What are Taxes? STGs: Understand, explain, analyze, identify 1.How govt uses taxes to pay for programs 2.The roots of the concept of taxation in the U.S. Constitution & the U.S. Supreme Court 3.Types of tax bases and structures 4.Characteristics of a good tax 5.Who bears the tax burden

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Where does it come from? Where does govt get the money to pay for programs? Where do taxes come from? So, in the end, who pays for the programs offered by the govt?

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TAXES & The Constitution Q: Does government have the authority to tax you? A: YES. Q: Where? A:

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Tax Bases What can be taxed? P I G S Methods: Individual income tax Sales tax Property tax Corporate income tax

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Types of Tax Structures pg 360, Figure 14.1 Type of TaxDescriptionMethodExample #1 Rons taxes on $50,000 income Example #2 Marys taxes on $150,000 income ProportionalFlat Tax ProgressiveIncome Tax RegressiveSales Tax

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Characteristics of a Good Tax 1.S 2.E 3.C 4.E

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Sec 2 Federal Taxes STGs: Understand, explain, analyze, identify 1.The process of paying individual income taxes 2.The basic characteristics of corporate income taxes 3.The purpose of Social Security, Medicare and unemployment taxes 4.Other types of taxes

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How does govt know how much you owe for taxes? How does the process work? 1.Withholding taxes 2.Pay as You Go 3.File a Tax Return 4.Tax Bracket

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Basic characteristics of corporate income taxes Progressive Tax Rate Corporations have many deductions (more than individuals) that reduce their taxable income.

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The purpose of Social Security, Medicare and unemployment taxes Tax/ProgramSourcePurpose Social SecurityFICA based on your income MedicareFICA Unemployment TaxBased on your income. You cant collect it IF you dont pay into this fund.

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Other types of taxes Type of TaxExplanation/Example 1. 2. 3. 4. 5.

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Sec 3 Federal Spending STGs: Understand, explain, analyze, identify 1.Difference between mandatory and discretionary spending 2.Major entitlement programs 3.Categories of discretionary spending 4.Impact of federal aid to state and local governments

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Difference between mandatory and discretionary spending Spending TypeDefineExamples (Pg 371, Figure 14.6) List all Mandatory Spending Discretionary Spending Which one is Required?

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Major entitlement programs Pg 372 Are these Discretionary or Mandatory? Why are such programs called Entitlement Programs? Entitlement Programs are Means-Tested. What does that mean? Can these types of programs be cut easily? Why or why not?

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Categories of Discretionary Spending Pg 371, Figure 14.6 Pie Chart and Pgs 373-74. List the 3 largest types/categories of Discretionary Spending 1. 2. 3.

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Impact of federal aid to state and local governments List 6 areas/programs where State Govts receive aid/money from the Federal Govt: 1. 2. 3. 4. 5. 6.

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Sec 4 State and Local Taxes & Spending STGs: Understand, explain, analyze, identify 1.How states use a budget to plan spending 2.Where state taxes are spent 3.The major sources of state tax revenue 4.Local government spending and sources of revenue

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How states use a budget to plan spending Budget TypeEExplanation Operating Budget Capital Budget

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Where state taxes are spent 1. P 2. H 3. E 4. A 5. A 6. W

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State Tax Revenue What CANT be taxed? 1. 2. 3. 4. What IS taxed? 1.S 2.State I 3.C 4.Other: 1.Savings accounts 2.Inheritance 3.Car Registration 4.Dog License AND MORE

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Pg 379, Figure 14.8. List the 5 largest of each. LOCAL GOVT REVENUE SOURCES AND SPENDING REVENUE SOURCESSPENDING