Ch. 25 TAXATION

Example of a Paycheck

Taxation Revenue: Money the government receives. Expenditures: Money the government spends. 60 to 80 percent of state and local government revenue comes from taxation. Intergovernmental Revenue: Money received from other governments. –Example: States receive a big chunk of money from the Federal Government. Local governments then can get some of that money from the state. Nearly 100 percent of federal government revenue comes from taxes.

North Carolina 2014

Taxation Problems The government sometimes abuses its power to tax which leads to revolts. Stamp Act (1765): British tax on virtually all goods. Tea Act (1773): British tax on tea. Led to the Boston Tea Party. British taxes lead to the American Revolution.

Taxation Powers The first government of the United States was the Articles of Confederation. The national government could not tax under the Articles. Under the Constitution, the government is given a limited power to tax to keep it from abusing its power.

Limits on Taxation The Constitution gives the government the power to tax. All appropriations bills (tax bills) are introduced in the House of Representatives. –Appropriations bills are laws that allow spending for a particular activity All national taxes are the same throughout the country. The 14th amendment says all groups must be taxed equally.

Tax Classifications Progressive tax: Based on income. Higher taxes on those with higher incomes. Those who make less than a certain minimum pay no taxes. Regressive tax: People pay the same dollar amount with no consideration of income. –Affects people with lower incomes because it’s a larger percentage of their total income. Proportional tax: Takes the same percentage of all incomes.

1.Which type of tax classification could have the greatest impact on those with higher incomes? Why? 2.Which type classification could have the greatest impact on those with lower incomes? Why?

Income Tax Tax on income 2 types - Personal income - Tax on an individual’s yearly income Corporate income - Tax on a corporation’s profit. 16th amendment (1913): Gave the government the power to collect income tax.

Paying Income Tax Employers withhold funds from checks to pay the state and national government. Because of this, taxpayers do not pay as much at the end of the year. Some taxpayers receive a refund (paid too much during the year)

Income tax is a Progressive Tax People with higher incomes pay a higher percentage in taxes. There are tax percentage rates of 10%, 15%, 25%, 28%, 33%, and 35%. The belief is that people with less money need more for necessities.

Tax Return The deadline is April 15th. All taxpayers fill out a tax return form and send it to the Internal Revenue Service (IRS). An exemption is a portion of income that is not taxed. Deductions are for medical expenses and charitable contributions. They are not taxed. Everything else is taxable income.

Sales Tax Sales Tax Tax paid at the time of purchase. Tax paid on all purchases. The revenue is sent to state and local governments. Some state governments exclude necessary items from the sales tax. –North Carolina used to have a tax free weekend for school items - the 1 st weekend in August

Property Tax Property Tax Tax on the value of property. Can include buildings, stocks, bonds, cars. The property is examined to assess the value. Local governments set the tax rate. Property taxes have increased steadily over the years.

Other Major United States Taxes Social Insurance: Social security tax. (FICA) Excise: Special tax on alcohol, tobacco, and gasoline. Estate: Tax on the assets of the deceased. Inheritance: Tax paid on anything person inherits. Gift: Tax paid on the value of an expensive gift received.

Non-Tax Revenue The government will - sell and rent land charge tolls for the use of roads and canals charge fees for driving, hunting, fishing, and getting married. Charge fines (traffic). run lotteries to provide revenue, but they are controversial.

Answer the following 2 prompts on a separate piece of paper and turn in - 1.In 1-2 paragraphs, explain which tax classification you feel is the most fair? Give at least 3 reasons why. 2.If the federal government needed to increase their revenue, which kind of tax (ex. Sales, excise, estate, income…..) do you think it should increase? Why? 1-2 paragraphs

Discretionary spending – This spending that must be authorized each year.

Mandatory Spending – This is spending that does not need approval each year