Tax Unit American Government. General Overview  Governments need financial resources to carry out their activities  Government is required to follow.

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Tax Unit American Government

General Overview  Governments need financial resources to carry out their activities  Government is required to follow a budget that balances money taken in by the government (revenue) with money it spends (expenditures)  A TAX is money paid by individuals, businesses, and organizations to support the government  Americans pay a variety of different taxes

About taxes  The federal government require employers to take money for income taxes from the paychecks of their employees (payroll deductions)  Employers turn the tax money over to the government  Taxpayers report his/her income on an income tax form every year on or before April 15  Taxpayers take deductions from income:  Examples: home mortgage payments, interest paid on bank loans, large medical expenses…  Issue a refund if the income on which the person pays taxes is smaller

Types of Taxes  Regressive Taxes: this is a tax that does not change with a persons ability to pay the tax  Proportional Taxes: the percentage rate stays the same regardless of how much you earn (dollar amount will increase as your salary increases)  Progressive Taxes: the percentage rate increases as the person’s income increases-people with higher incomes are expected to pay a higher percentage rate in taxes

Democrats vs. Republicans  Democrats-favor a tax system that is significantly progressive  Republicans favor a tax system that is proportional or even regressive.

Federal Taxes  Income Tax: levied on most sources of income and/or corporations  Social Security and Medicare: taxes are places on wages and salaries  Estate Tax is collected from property left behind by those that have d ied.

State and Local Tax  Income tax: a tax levied on the yearly earnings of individuals and/or corporations  Sales tax: a tax places on the sale of various items It is paid by the purchaser.  Property tax: a tax levied on the assessed value of a property that you own. ( Largest source of income for local governments)

 Licenses and fees: are charges from a specific government agency for things such as court fines, hunting ad fishing licenses, car registration…ect.  Inheritance Tax: this is a generally a state tax paid on the specific items that a person inherits.  Amusement tax: a selective sales tax levied specifically on activities for entertainment (movie tickets, concert tickets and sporting events).

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