Taxes & Government Spending Chapter 14 Section 1 What are Taxes?

Taxes & Government Spending

Chapter 14 Section 1What are Taxes?


Objectives: Understand how the government uses

taxes to fund programs. Identify the roots of the concept of

taxation in the United States Constitution. Describe types of tax bases and tax

structures. List the characteristics of a good tax. Identify who bears the burden of a tax.


If you look at all taxes taken from your paycheck, it can be a bummer.

Frustration over taxes, is what led the American Colonists to go to war against Britain and declare their independence.


Money taken from your paycheck, it is not done without your

consent. As citizens of the United States, we

authorize the government, through the Constitution and our elected representatives in Congress, to raise money in the form of taxes.


Funding Government Programs A TAX is a required payment to a local,

state, or national government. Taxation is the primary way that the

government collects money. Taxes give the government the money

needed to operate. Revenue – income received by a

government in the form of taxes and other non-tax sources.


What is a Tax?

What is Revenue?


Tax A payment to any local, state, or

national government Revenue

income received by a government in the form of taxes and other non-tax sources.


Without revenue from taxes, the government would not be able to provide the goods and services that we not only benefit from, but that we expect the government to provide.

Provide things like… Education National Defense Highways Law Enforcement


List one way that the money from revenue is spent by a governmental body?


List one way that the money from revenue is spent by a governmental body?

Education National Defense Highways Law Enforcement


Taxes & the Constitution Taxation is a powerful tool. The founders of the United States did

not, without careful consideration, give their new government the

power to tax. The Constitution they created spells out

specific limits on the government’s power to tax.


1. Power to Tax+ Article I Section 8 Clause 1

To lay and collect taxes, duties, Imports, and excise, to pay the debts, and provide for the common defense and general welfare of the united States; but all duties, imports, and excises shall be uniform throughout the United States.


What gives the Government the power to tax the people?


U.S. ConstitutionArticle I Section 8 Clause 1


2. Limits on the Power to Tax+ Constitution limits certain kinds of

taxes.1. the purpose of a tax must be for

the “common defense and general welfare”.

A tax cannot bring money to an individual

2. Federal taxes must be the same in every state.


Tax Bases and Tax Structure Tax Base - is the income, property,

good, and service that is subject to a tax.

Income – Individual Income Taxes Property – Property Taxes Good & Service – Sales Taxes


Name three types of taxes that our country has?


Name three types of taxes that our country has?

Income Property Sales


Proportional Tax – a tax for which the percentage of income paid in taxes remains the same for all

income levels. i.e. a state income tax is 6% of your

individual income. Progressive Tax – a tax for which the

percentage of income paid in taxes increases as income increases.

i.e. the US federal income tax


Regressive Tax – a tax which the percentage of income paid in

taxes decreases as income increases.

i.e. the sales tax The higher-income households spend a

lower proportion of their incomes on taxable goods and services.


Characteristics of a Good Tax A good tax should have four

characteristics1. Simplicity – it should be simple

and easily understood by everyone2. Efficiency – the government

should be able to collect the taxes without spending too much time or money.


Characteristics of a Good Tax3. Certainty – it should be clear to the

taxpayer when a tax is due, how much money is due, and how the tax should be paid.

4. Equity – the tax system should be fair, so that no one bears too much or too little of the tax burden.


What are the 4 characteristics of a good tax?


What are the 4 characteristics of a good tax?

Simplicity = Easy to understand Efficiency = Easy to collect Certainty = Clear when and how much you owe. Equity = Fairness


What is a regressive tax?

Give an example.


What is a regressive tax? a tax which the percentage of income

paid in taxes decreases as income increases

Give an example. Sales Tax


What is a progressive tax?

Give an example.


What is a progressive tax? a tax for which the percentage of

income paid in taxes increases as income increases.

Give an example U.S. Federal Tax System


What is a proportional tax?


What is a proportional tax? a tax for which the percentage of

income paid in taxes remains the same for all income levels.

Give an example State Income Tax


Defining Fairness Two proposed ideas

1. Benefits-Received Principle - A person should pay taxes

based on the level of benefits he or she expects to receive.

- People who drive should pay the gasoline taxes that are used to build and maintain highways.


2. Ability-to-Pay Principle- People should pay taxes

according to their ability to pay.

- This is a progressive tax plan –

individual income taxes.


Who Bears the Burden of a Tax? The people who pay the tax The business who collects the tax and

sends it into the government. Incidence of a tax – who will pay the

final burden of the tax. When policymakers consider a new tax,

they examine who will actually bear the burden. Sometimes the consumer bears it and sometimes the business has to bear it.


What is a incidence of tax?


What is a incidence of tax? who will pay the final burden of the tax.

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Taxes & Government Spending Chapter 14 Section 1 What are Taxes?