chapter 14 section 1: what are taxes? · regressive taxes: o is a tax for which the percentage of...
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Chapter 14 Section 1: What are taxes?
Objectives: o WHAT: Explain the sources
of government’s authority to tax.
o WHAT: Describe the types of tax bases and tax structures and who bears the burden of taxes.
o WHY: ECN.4.2 Demonstrate understanding of basic concepts (Taxes)
• “Tell us therefore, What thinkest thou? Is it lawful to give tribute unto Caesar, or not? But Jesus perceived their wickedness, and said, Why tempt ye me, ye hypocrites? Shew me the tribute money. And they brought unto him a penny. And he saith unto them, Whose is this image and superscription? They say unto him, Caesar's. Then saith he unto them, Render therefore unto Caesar the things which are Caesar's; and unto God the things that are God's.” Matthew 22:17-21
The Purpose of Taxation: • The Constitution gives the
government the power to collect taxes through Congress.
• Taxation is the primary way that the government collects money, this income is called revenue.
• Revenue funds the goods and services of the government.
Limits on the Power to Tax: o First, the purpose of a tax must be
“for the common defense and general welfare.”
o Second, federal taxes must be the same in every state.
o Congress cannot tax religious groups.
o This is because it would violate the freedom of religion in the first amendment.
Limits on the Power to Tax:
o The government can collect taxes only
on imports.
o Congress cannot tax exports.
o (Congress can restrict or prohibit the
export of certain goods, such as
technology or weapons).
o The Sixteenth Amendment legalized a
direct tax on citizens’ personal income.
Tax Structures and Tax Bases o Government collects a wide variety of
taxes.
o Economists describe these taxes in different ways.
o These three tax structures are progressive, proportional, and regressive.
o Second they describe a tax according to the object taxed, the tax base.
Progressive Tax:
o People with higher incomes pays more
taxes.
o The more you earn, the more you pay.
o (Volunteers to act out progressive tax)
Proportional Taxes:
o A tax for which the percentage of
income paid in taxes remains the same
at all income levels.
o Everyone pays the same percentage.
o (Volunteers to act out Proportional tax)
Regressive Taxes: o Is a tax for which the percentage of income
paid in taxes decreases as income increases.
o For example, although the sales tax rate remains constant, a sales tax is regressive.
o This is because higher-income households spend a lower proportion of their incomes on taxable goods and services.
o Someone that makes more money will have less impact on the money they spend on goods and services than someone who is poor.
ACTIVITY
• Create a skit explaining progressive,
proportional, or regressive taxes.
• What type of tax do you think is the most
fair? (Progressive, Proportional,
Regressive)
• Choose a corner.
Tax Base: o Is the income a property, good, or service
that is subject to a tax.
o Different taxes have different bases.
o The individual tax is based on a person’s earnings.
o The Corporate income tax uses a company’s profits as its base.
o The property tax is based on real estate and other property.
Tax Base:
o The tax base for the sales tax
are goods or services that are
sold.
Discussion Questions
o Do you think the rich and companies that
make huge profits should pay higher taxes
than the rest of the population?
o What do you think is a fair tax? (group
activity)
Chapter 14 Section 2: Federal Taxes
Objectives: o WHAT: Describe the process of
paying individual income taxes
o WHAT: Identify: the basic characteristics of corporate income taxes.
o WHAT: Explain: the purpose of Social Security, Medicare, and unemployment taxes.
o WHAT: Identify other types of taxes.
o WHY: ECN.4.2 Demonstrate understanding of basic concepts (Taxes)
• Luk_20:25 And he said unto
them, Render therefore unto
Caesar the things which be
Caesar's, and unto God the
things which be God's.
Discussion Questions
o In groups, develop your own tax laws.
What type of taxes will you have to raise
money for the government? (Sin Tax?
Income Tax? Property Tax? Gas Tax?
Etc.)
o The governments main
source of revenue comes
from the federal tax on
individuals’ taxable income.
o 43 percent of the
governments revenue comes
from this source.
Pay as You Earn Taxation: o The amount of federal income tax a
person owes is determined on an annual basis.
o Federal income tax is collected in a “pay-as-you-earn” system that you pay your income tax throughout the calendar year.
o They have until mid-April of the following year to pay any additional income taxes they owe.
Tax Brackets:
o The federal income tax is
progressive tax.
o In other words the tax rate raises
with the amount of taxable
income.
Tax Withholding:
o Employers are responsible in part of collecting federal income taxes.
o They do so by withholding or taking payments out of your pay before you receive it.
o The amount they withhold is based on an estimate of how much you will owe in federal income taxes for the entire year.
o The employers forwards the deductions to the Federal Government.
Filing A Tax Return o After the calendar year ends, employers
give their employees a report stating how much income tax has already been withheld and sent to the government.
o The employee uses the information to complete a tax return.
o A tax return is a form used to file income taxes.
o On it, you declare your income to the government and figure out how much of that income is taxable.
Filing A Tax Return o Taxable Income is a person’s gross
or total income minus exemptions and deductions.
o Gross income includes earned income, salaries, wages, tips, and commissions.
o It also includes income from investment such as interest on savings account and dividends from stock.
Filing A Tax Return o Personal exemptions are set amounts
that you subtract from the gross income for yourself, your spouse, and any dependents.
o Tax deductions are variable amounts that you can subtract or deduct from your gross income.
o Deductions include such items as interest on a mortgage, donations to charity, significant medical expenses, and state and local tax payments.
Filing A Tax Return o Once you determined how much
tax you owe, you can apply any tax credits that you may be allowed.
o A tax credit is an amount that you can subtract from the total amount of your income tax.
o You can claim a credit for such things as a portion of the cost of child-care and higher education.
Filing A Tax Return o Completing a tax return allows you
to determine whether the amount of income taxes you have already paid was higher or lower than the actual amount of tax you owe.
o If you have paid more than you owe the government sends you a refund.
o If you pay less than you owe, you must pay the balance to the government.
Filing A Tax Return
o All federal income tax returns
must be sent to the Internal
Revenue Service or IRS by
midnight on April 15 or the next
business day if April 15 falls in a
weekend.
Corporate Income Taxes: o Corporations must also pay an
income tax.
o This includes the Federal Insurance Contribution Act (FICA)
o Cost of employers’ health insurance.
o Social Security
o Medicare (For those over 65)
o Unemployment Taxes.
Unemployment Taxes: o The federal government also
collects an unemployment tax, which is paid by employers.
o In effect the tax pays for an insurance policy for workers.
o If workers are laid off from their jobs through no fault on their own, they can file an “unemployment compensation” claim and collect benefits for a fixed number of weeks.
Other Types of Taxes: o Federal Excise Tax: a general revenue tax for
sale or manufacture of a good such as gasoline, cigarettes, alcohol, telephone services, cable TV, etc.
o Gift Tax: is a tax on the money or property that one person living gives to another.
o Under current law, a person can give up to $12,000 a year tax-free to each of several different people.
o Estate Tax: is a tax on the estate or total value of the money and property, of a person who has died.
o Import Taxes: taxes on imported goods (foreign goods brought into the country) are called tariffs.
Incentives:
o Incentives also come in the
form of tax credits.
o Congress has tried to
encourage energy conservation
by offering a variety of credits
to consumers and the industry.
o Such as solar panels, hybrid
cars, etc.
Discussion Questions
• Where do you think the government should spend more of their tax dollars? Rank your categories and explain why.
• Defense? Education? Roads and Highways? National Parks? Welfare? Regulating businesses? Law Enforcement? Space Exploration? Research and Development? Medicare? Obamacare?
Chapter 14 Section 3: Federal Spending
Objectives: o WHAT: Explain the difference
between mandatory and discretionary spending.
o WHAT: Explain major entitlement programs.
o WHAT: Explain the relationship of aid between the Federal and State governments.
o WHY: ECN.4.2 Demonstrate understanding of basic concepts (Taxes)
• “For for this cause pay ye tribute also: for they are God's ministers, attending continually upon this very thing. Render therefore to all their dues: tribute to whom tribute is due; custom to whom custom; fear to whom fear; honour to whom honour.” Romans 13:6-7
SPENDING
o Mandatory Spending: refers to money that Congress is required by existing law to spend on certain programs or to use for interest payments on the national debt.
o Discretionary Payments: Is spending which lawmakers are free to make choices.
MANDATORY SPENDING:
o Entitlement Programs are social
welfare programs that people
who meet requirements such as
age and income.
o The Federal Government
guarantees assistance for all
those who qualify.
Entitlement programs include:
o Social Security: For retirement
o Medicare” For Seniors.
o Medicade: For low-income
families, people with disabilities,
and elderly in nursing homes.
Discretionary Spending: o Spending on defense accounts for
half of the discretionary spending.
o The rest go to education and training
o Scientific research
o Student loans
o Law enforcement
o Environmental cleanup
o Disaster aid
Discussion Questions
• Do you think the government should be responsible for paying for programs to pay for the poor and elderly or do you think that private charities should be responsible for helping the poor and needy?
• What are absolute needs that the government must spend on for the nation? (List and explain 4).
SPENDING
o Part of the federal budget pays
for salaries of millions of people
who work for the civilian
branches of the federal
government.
Federal Aid to State and Local Governments
o State and federal governments
share the costs of Medicaid and
unemployment compensation.
o Federal money also goes to
other State programs such as
education, lower-income
housing, mass-transit, etc.
Necessary or Unnecessary Federal Jobs
• FBI Agent
• CIA Agent
• Congressman
• Food quality Inspector
• Judge
• Attorney
• Drug Enforcement Agent
• Doctor
• Nurse
• Food Services
• Clerk
• TSA Agents
• Receptionist
• Scientist
• Soldier
• Ambassador
• Secret Service Agent
• Janitor
• Washington D.C. police officer
• Engineer
• Pilot
Federal Aid to State and Local Governments
o Federal grant-in-aid are grants
of federal money for certain
defined purposes.
o Federal aid also comes in when
a particular state suffers natural
disasters such as FEMA.
Discussion Questions
• Do you think the government should go in debt and spend more than it has for such programs as welfare, military defense, social security and social programs causing the government to increase its huge debt, which is in the trillions of dollars?
• If you apply what you learned from Saving the Crumbs, how do you think government would spend their money?
Chapter 14:4: State and Local Taxes and Spending.
Objectives:
o EXPLAIN: How states use a budget to plan their spending.
o EXPLAIN: Identify where state taxes are spent and the major source of tax revenue.
o WHY: ECN.4.2 Demonstrate understanding of basic concepts (Taxes)
• “And Jesus answering said
unto them, Render to Caesar
the things that are Caesar's,
and to God the things that are
God's. And they marvelled at
him.” Mark 12:17
State Budgets:
o A budget is an estimate of
future revenue and expenses.
o States have two budgets,
operating budgets and capital
budgets.
State Budgets:
o Operating Budgets: To plan for
its day to day spending needs.
o Capital Budgets: to plan for
major capital or investment,
spending (infrastructure) etc.
State Budgets:
o Balancing State Budgets: In
most states there is a
requirement for a balanced
budget, budgets in which
revenues are equal to spending.
o These laws apply only to the
operating budget, not the capital
budget.
Where Are State Taxes Spent? o Education
o Public Safety
o Highways and Transportation
o Public Welfare (state hospitals and clinics, inspectors and regulators)
o Arts and Recreation (Museum and parks)
o Administration (judges, and state government officials).
Assignment
Determine what are essential needs that the
state government must provide to its
citizens.
Tax Revenue for The State
o Sales Tax: Sales Tax is the main
source of revenue for state
government.
o This is a tax on goods and
services and a percentage of
the purchase price is added on
at the cash register and paid by
the purchaser.
Where Are State Taxes Spent? o States also impose excise taxes
on specific products and activities.
o Some are sin taxes that are intended to discourage harmful behavior on products like alcohol and tobacco.
o Other taxes apply to hotel and motel rooms.
o Many states also tax gasoline.
Property Tax o Includes real estate, or real
property, land and any permanent structures on the land to which a person has legal title.
o Personal property movable possessions or assets such as jewelry, furniture, and boats.
Tax Revenue for The State
o Income Tax
o Corporate income tax
Where Are State Taxes Spent?
o Lower corporate tax and along
with a well-educated workforce
and efficient public services can
attract new businesses to a
state.
Other State Taxes:
o Licensing Fee: Is a kind of tax
that people pay to carry on
different kind of businesses
within a state.
o Such as a carpenter, building
contractor, etc.
Other State Taxes:
o Local Government Spending:
Encompasses towns, cities,
counties, townships, and special
districts such as school districts.
o Jobs in the local government
include police officers, teachers,
librarians, life guards, DMV, etc.
Assignment
You are a governor of the State of California, prioritize how you will spend your money for your States and rank the following below.
o Education, Law Enforcement, Roads and Freeways, Libraries, Social Services (welfare and assistance), Hospitals, Department of Motor Vehicles, Emergency Services, Pensions and retirement, and Prisons and Jails.