• “ In this world, nothing can be said to be certain, except death and taxes.” Benjamin Franklin
• “Death and taxes may be certain, but we don’t have to die every year.” anonymous
Taxes?
• What types/kind of taxes do American pay?
What are Taxes Used for…?
Financing Government• Objectives: SWBAT - • Understand how the Federal Government raises
money• Differentiate between the various types of
federal/state/local taxes• Determine why the government must borrow
money• Discover how the federal Government spends
money• Explain how the President and Congress
prepare the federal budget
The Power to Tax
• Congress uses this power to pay for government’s expenses
• Regulate things government thinks are dangerous
Individual/Personal Income Tax
• Tax on “earnings”• Direct tax• Progressive tax• Brings in the largest amount of $ to the
federal gov’t
Tax Chart 2015
Tax Return
• April 15th
• Income – W2 form, interest – 1099, Winnings, profit from sale, gifts, etc.
• Exemptions - credits for certain people• Deductions – expenses not taxed,
charities, interest in mortgages• IRS – processes tax returns
Corporate Income Tax
• Tax on business profits• Progressive tax• Non profit organizations and charities are
not taxed
Social Insurances taxes
• Three important programs– Social Security– Medicare– Unemployment– Paid by both employer and employee– Regressive taxes – same rate
Excise Taxes
• Indirect tax the gov’t puts on the making, selling , or using of certain goods and services
• Gas, telephone services, cable, beer• Tax built into the price
Estate and Gift Taxes
• Estate – on the property and $ of a person who has died
• Gift – a tax on gifts over 14,000
Custom Duties
• Taxes on goods brought in to this country• Tax on goods above a certain threshold
Sales Taxes
• taxes placed on the sale or lease of goods and services in the United States.– Can be
» National» State » Local
» Pa 6%» Phila 2%
Non Revenue Taxes
• To regulate harmful activities• “Sin taxes” (alcohol, cigarettes, smokeless
tobacco, gas guzzlers)
Non-Tax Revenue and Borrowing
• Fees for passports, court fines, sale of property, etc.
• Borrow to cover additional costs– Wars, big projects, pay deficit
Public Debt• Also called the national debt
– Amount borrowed but not yet paid back– Includes interest– Deficit spending – borrowing to meet
expenses
Debt Clock
Spending and the Budget
• Budget – plan for income and expenses– Entitlement programs – paying to people who
meet certain requirements• Largest area of spending• Social Security. Medicare, food stamps,
unemployment– Interest on national debt– Defenses spending
Controllable vs. UncontrollableSpending
• Controllable – Congress and the President can raise or lower
• Uncontrollable – gov’t must spend because it promised it will do so. (Entitlements – Social Security, welfare)
• Most government spending is uncontrollable
Federal Budget
• Government’s yearly plan for spending• President and Congress work on the
budget• President and OMB (Office of
Management and the Budget) put budget together
• Congress studies and decides on spending limits
What Happens When The Costs of Government Exceed Revenue?
• 1.?
• 2.?
• 3?
What Happens When The Costs of Government Exceed Revenue?
• 1. Cut expenses; cut government programs; cut spending
• 2.?
• 3?
What Happens When The Costs of Government Exceed Revenue?
• 1. Cut expenses; cut government programs; cut spending
• 2. Raise taxes
• 3?
What Happens When The Costs of Government Exceed Revenue?
• 1. Cut expenses; cut government programs; cut spending
• 2. Raise taxes
• 3. Borrow more money let future generations pay back