7th Grade Civics Miss Smith *pgs. 299-303 Types of Taxes 7th Grade Civics Miss Smith *pgs. 299-303

Income Taxes Income tax- tax on the earnings of individuals and businesses The main source of revenue collected by the federal gov. The amount each citizen pays is calculated based on how much they earn and other factors explained in the U.S. tax code

How Much Do We Pay? Taxpayers can deduct (or subtract) a certain amount of money from their taxes for themselves and their dependents (dependents are people who rely on other people for financial support) These amounts are called exemptions

How do We Pay? Employers take income tax out of each employees paycheck and forwards it to the government on their behalf

Social Security Taxes Employers also deduct Social Security tax from paychecks This tax is used to provide income to the retired and people with disabilities

State and Local Income Taxes Most state and city governments also collect income tax These tax rates are lower than federal income tax rates

Corporate Income Taxes Based on a corporation’s profits Profit- income a business has left after paying expenses

Sales tax is collected on most products sold Sales and Excise Taxes Sales tax is collected on most products sold Excise taxes are like sales taxes but on luxury goods

Property Taxes Property tax- tax on the value of the property owned by a person or business The main source of income for most local governments Collected on real and personal property Real property- land, buildings, and other structures Personal property- stocks, bonds, jewelry, cars, and boats Most public school funding comes from property taxes

Estate, Inheritance, and Gift Taxes Estate tax- federal tax on all the wealth a person leaves Inheritance tax is based on the portion of an estate received by an individual after the estate is divided Gift taxes are paid on gifts worth more than $13,000

Import Taxes Tariff- import tax on products from other countries (sometimes called a customs duty) Regulates trade and supports the U.S. economy Can be used to encourage American industry by making domestic products less expensive than imported products Or can hurt American consumers by making the products they buy more expensive