Government Revenue and Spending Slide 2 Mandatory payments known
as taxes make up the vast majority of government revenue.
Principles of Taxes: - Benefits Received: The idea that people
benefitting from a public good should pay into that benefit -
Ability-to-Pay Principle: The idea that people should be taxed on
their ability to pay. Requirements of Taxes: - Equity (Fairness) -
Simplicity (Low Difficulty) - Efficiency (Effectiveness) The
Principles of Taxes Slide 3 Slide 4 Slide 5 Tax Bases: - Individual
Income Tax, Corporate Income Tax, Sales Tax, and Property Tax Tax
Structures (Types) - Proportional Tax (flat tax): The tax is the
same across the board. - Progressive Tax: Higher percentage taxes
are placed on higher income earners. - Regressive Tax: Higher
percentage taxes from low-income earners. Tax Bases and Structures
Slide 6 The Progressive Tax Income BracketMarginal Tax Rate
$0-$10,00010% $10,001-$30,00015% $30,001-$50,00025% Income in Each
BracketTax Bracket $10,00010% $20,00015% $10,0025% Income in
BracketMarginal Tax RateMarginal Tax $10,00010%$1,000
$20,00015%$3,000 $10,00025%$2,500 If an individual had an income of
$40,000, the second table shows how much of that income would fit
in each bracket. To add up the total tax, you must multiply the
income in each bracket by the tax rate for that bracket, and then
finally take a total. Total of $6500 in taxes based on a $40,000
income at these rates. Slide 7 #1 Resource Allocation: Taxes impact
supply because producers who are seeking efficiency are looking at
how to maximize profits. #2: Productivity and Growth: Too high can
slow growth, too low can decrease the ability of the government. #3
Economic Behavior: Used to encourage or discourage certain economic
behavior. Impact of Taxes on the Economy Slide 8 Slide 9
Withholding is money taken from pay before the worker receives it.
Taxable Income is the portion of income subject to taxation. A Tax
Return is a form used to report income and taxes owed to
government. Federal Tax Terms Slide 10 Slide 11 FICA is the Federal
Insurance Contributions Act. Social Security is a federal program
to aid older citizens, children who have lost a parent, and the
disabled. Medicare is a national health insurance program mainly
for citizens over 65. FICA: Taxes That Help Slide 12 Corporate
Income Tax The estate tax is a tax on property transferred to
others on the death of the owner. The gift tax is a tax on assets
given by one living person to another. The excise tax is a tax on
the production or sale of a specific good or service. Customs duty
is a tax on goods imported to the U.S. A user fee is money charged
for the use of a good or service. Corporate Taxes Slide 13 Slide 14
Slide 15 Slide 16 #1 Mandatory Spending (Required by Law): The
majority of this is done through entitlements (welfare programs).
#2 Discretionary Spending (Authorized by Government): Areas include
infrastructure, education, the environment, technology, and the
justice system. 2 Types of Federal Spending Slide 17 Slide 18 The
federal budget is the governments plan for spending government
income over a year. The year long budget period is known as the
fiscal year and runs from October 1st to September 30th
Appropriations are specific amounts of money set aside for specific
purposes (this is done by congress and sent to the President for
approval). The Federal Budget Slide 19 #1 Directly #2 Transfer
Payments (nothing received in return) #3 Grant-In-Aid (transfer
payment to a state from the federal government) Impacts of Federal
Spending #1 Resource Allocation #2 Income Redistribution #3
Competition in Private Sector How is money paid out? Slide 20 Slide
21 Slide 22 Slide 23 #1 Sales and Excise Taxes: Taxes on items sold
within the state (5 states do not). Excise taxes are on specific
items such as cigarettes, alcohol, gasoline, etc.. #2 Income Taxes:
All but 5 sates levy a state income tax (Texas is one that does
not). Most states also have a state corporation tax on businesses
operating there. 2 Types of State Taxes Slide 24 Slide 25 All
states except Vermont are required to have balanced budgets where
revenue equals spending. An operating budget is a plan for day to
day expenses. A capital budget is a plan for major expenses and
investments. State Budget Slide 26 The majority of local revenue
comes from property taxes that are assessed on a yearly basis.
Local money goes to public education, public safety, and local
health. Local Taxes
