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Our Government
What does our Government do anyway?
1. Taxes Fund Public Goods and Services
National Defense
State and Local Police
Financial Aid
Health Care for Elderly
Public Education
Social Services
2. Regulates Business Activity
Monopoly and Legal Monopolies Protects Consumers-Agencies
3. Redistributes Income
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Agencies-Enforce the Laws
• USDA (Department of Agriculture)• Consumer Product Safety Commission• Fair Package and Labeling Act• Food, Drug, and Cosmetic Act• Child Protection and Toy Safety Act
Companies that break these laws are penalized!
OK, how does the Gov. pay for all this?
TAXES!!!
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•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
•Cooking Oil, Foreigners,Slaves (Ancient Egypt)
Early Taxes
•Sales, Inheritance, Imports,Exports (Ancient Rome)
•Beards, Beehives, Boots,Souls (Russia, 1702)
•Bachelors (England,1695; Missouri, 1820)
Each person is responsible for filing a tax return.
Voluntary Compliance
Tax Avoidance versus Tax Evasion
•Tax Evasion: Failure to pay legally due taxes
•Tax Avoidance: Legal means of decreasingyour tax bill
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Who should pay?
• BENEFIT PRINCIPAL
Those who receive the benefit should pay for it
• ABILITY TO PAY
People with higher incomes should pay more in taxes
How is it paid?
• DIRECT
Paid directly to the government
Advantage:Pay-as-you-earnYou know how much
• INDIRECT
Tax is hidden in the price of the goods
Tax Brackets – 2010 Taxable Income1. Income tax-tax paid on income received
Types of Taxes 2. Sales Tax-consumption tax charged at
the point of purchase for certain goods and services
3. Property Tax- paid for owning land & property
4. Excise Tax- placed on certain products to discourage use
Types of Taxes (continued)
5. Social Security Tax- tax is imposed upon working people and their employers
6. Estate & Gift Tax- limits the build-up of wealth
7. Business & License Tax- fees for having a business or activities
8. Tariffs- taxes on imported goods
What are the 3 levels of Government?
FederalStateLocal
The Federal Government Dollar- Where It Comes From
Excise, Customs, Estate, Gift, and
Miscellaneous Taxes7%
Personal Income Taxes
43%Social Security, Medicare,
and Unemployment and other Retirement Taxes
35%
CorporateIncome Taxes
7%Borrowing toCover Deficit 8%
What’s the Trend?
The Federal Government Dollar- Where It Goes
Law Enforcement and General Government
3%
Social Security, Medicare, andother Retirement
38%
National Defense, Veterans, and Foreign Affairs
20%
Social Programs21%
Physical, Human, andCommunity Development
10%
Net Interest onthe Debt
8%
What is our Federal Debt?
• $14 TRILLION!!!http://www.usdebtclock.org/index.html
Federal Tax Dollars• Main source: Personal Income Tax• Main expenditure: Social Security
State Tax Dollars• Main source: State Income Tax2nd: Sales Tax
• Main expenditure: Health & Human Services2nd: Education
2 Tax RatesPROPORTIONAL PROGRESSIVE
$ $
And where did it go? (Federal)
SS, Medicare
National Defense
Interest on Debt
•Information on taxpayer returns is private
Taxpayer Rights
•Taxpayers have the right to appeal anIRS decision
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