& Taxation& Taxation

Government SpendingGovernment Spending

TaxationTaxation

Why Taxes?Why Taxes?

Government Expenses

Mandatory

EntitlementsInterest on DebtOperating Budget

Discretionary

should we or shouldn't we?

Why so much Political Debate?Why so much Political Debate? Discretionary spendingDiscretionary spending – should we – should we

or shouldn't we?or shouldn't we?• Capital budgetCapital budget – major projects – major projects• Defense, EducationDefense, Education• Tax incentivesTax incentives to encourage certain to encourage certain behaviors – behaviors – tax credits or exemptionstax credits or exemptions

Shouldn’t we work towards a Shouldn’t we work towards a balanced budgetbalanced budget??

Tax BaseTax BaseAreas subject to taxationAreas subject to taxation Income (city, state, federal)Income (city, state, federal) Sales (state)Sales (state) Property (local)Property (local) Corporate income tax Corporate income tax

(business profits)(business profits)

Tax StructuresTax Structures Progressive Progressive - - percentage percentage

increases as income increases – increases as income increases – income tax (income tax brackets)income tax (income tax brackets)

Proportional Proportional – – flat tax – same flat tax – same percentage regardless of income percentage regardless of income (property tax) (property tax)

Regressive Regressive – – smaller percentage smaller percentage of income is taken in taxes as of income is taken in taxes as income increases – (sales tax)income increases – (sales tax)

Progressive StructureProgressive Structure

1616thth Amendment: Amendment: The The Congress shall have power to Congress shall have power to

lay and collect taxes on lay and collect taxes on incomes, from whatever incomes, from whatever source derived, without source derived, without

apportionment among the apportionment among the several States, and without several States, and without

regard to any census or regard to any census or enumeration.enumeration.

Income TaxIncome Tax

Federal TaxesFederal Taxes Why is there money taken out of my check? Why is there money taken out of my check?

W4 – withholdings How much of my salary is taxed?How much of my salary is taxed?

W2 – taxable income Doesn’t the government realize that I need my salary Doesn’t the government realize that I need my salary

to live? -to live? -Personal exemption What about other expenses too, like work related What about other expenses too, like work related

uniform costs, or education? – uniform costs, or education? – deductions How much in total do I have to pay the government?How much in total do I have to pay the government?

Tax schedule - Brackets What if I have paid them too much- What if I have paid them too much-

1040ez - tax return (refund?)

2013: $3,900

Personal ExemptionPersonal Exemption

Individuals are entitled to claim a personal exemption for themselves and any dependents they support.

2013: $3,9002012: $3,8002011: $3,7002010: $3,6502009: $3,6502008: $3,500

DeductionsDeductionsShould I Itemize? Topic 501

Medical and Dental Expenses Topic 502

Deductible Taxes Topic 503

Home Mortgage Points Topic 504

Interest Expense Topic 505

Charitable Contributions Topic 506

Miscellaneous Expenses Topic 508

Business Use of Home Topic 509

Business Use of Car Topic 510

Business Travel Expenses Topic 511

Business Entertainment Expenses Topic 512

Educational Expenses Topic 513

Employee Business Expenses Topic 514

Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas)

Topic 515