Represent two different views on taxes that are still shared today.

Which is the fairest tax? -Everyone pays the same percentage -Those with higher incomes pay a higher percentage -Those with lower incomes pay a higher percentage. Which is the fairest tax? Take the survey & discuss your answers.

Essential Questions -____do governments redistribute income? Chapter 12 Taxes & Taxation -____do governments redistribute income? -____ do governments redistribute income? -____do regressive, progressive, and proportional taxes affect redistribution of income? Essential Questions

Governments redistribute income ___________________________________________________________________________. Governments redistribute income_____________________________________________________________________. Regressive, progressive, and proportional taxes decide the amount of taxes an individual must pay. The Main Ideas

What do other countries do for taxes? “Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, Andorra and the United Arab Emirates (UAE).” Investopedia.com

Why Do We Pay Taxes? So that the governments can… Pay for goods the general public uses Pay for services the general public uses

Progressive, Regressive, and Proportional Taxes Progressive Tax:____________________________________________. Income of $20,000 pays 15%, vs. income of $100,000 pays 25% Regressive Tax:_______________________________________________. You can more easily afford to pay sales taxes with a higher income Proportional Tax: _____________________________________________. Everyone pays 10% at all income levels Proportional taxes are taxes that stay the same regardless of a person's or business's income. For example, some sales taxes are considered proportional because a tax rate of 8% in a certain state would apply to all customers in that state and take the same fraction of their incomes. Regressive taxes also refer to uniform rates for everyone. These rates are considered regressive because low-income taxpayers are more affected by the rate than those with a higher incomes. This is because the tax takes a larger percentage of their incomes. Someone who earns $400 per week and pays 10% tax on groceries costing $200 would pay $20, or 5% of their income, in taxes. In the same scenario, a person earning $800 per week would only spend 2.5% in taxes Read more: What is the difference between a regressive tax and proportional tax? | Investopedia http://www.investopedia.com/ask/answers/042915/what-difference-between-regressive-tax-and-proportional-tax.asp#ixzz49m7JmFHJ Follow us: Investopedia on Facebook

What does the government do with that money What does the government do with that money? Which taxes pay for which goods and services? In other words, which taxes go to federal, state, or local public goods and services?

Federal vs. State/Local Taxes FEDERAL INFORMATION ______________________________ Income taxes Payroll taxes Social security taxes Medicare taxes Unemployment taxes Military defense Highways and roads Other gov’t programs STATE/LOCAL INFORMATION ________________________________ Sales taxes Income & Property taxes Grants from Fed. gov’t Education Public Welfare Roads and repairs Public Safety Police and Fire

Types of Taxes - ________________ Are charged both federally and by the State Rates are much different Federal Income Rate is much higher than State Tax your earned and unearned income Unearned Income includes received monies Inheritance, some retirement payments, etc. Charged against individuals and corporations _______________________________________________________ Federal rates get higher as income increases

Types of Taxes – __________________ These are the “other” things taken from your paycheck each time FICA – Federal Insurance Contributions Act Also known as ________________________________ Created to make sure people were “secure” when they were no longer in the workforce (1935) Followed the financial issues of the 20’s ___________________________________________ _____________________________________________ Additional tax to help alleviate medical costs to government when people are unable to pay bills themselves ______________________________________________

Types of Taxes – Transaction and Property Taxes __________________________________ Percentage charged upon the purchase of certain items ___________________________________________________________ _____________________________________________ Percentage charged on the value of land owned __________________________________________ ______________________________________________ Percentage charged on all large personal items Examples: Cars, Boats, Trucks, RVs, etc.

Possible Additional Taxes ________________________________________________________________ Registration fees Licensure fees Additional sales tax fees Gas taxes or transportation taxes Additional taxes on cigarettes and alcohol Goal is to make them too expensive for people to buy ____________________________________________________________

Redo the survey from before

http://www. investopedia http://www.investopedia.com/articles/personal-finance/100215/5-countries-without-income-taxes.asp https://en.wikipedia.org/wiki/Income_tax http://financial-dictionary.thefreedictionary.com/Territorial+tax+system https://www.google.com/search?q=no+taxes+images&safe=active&espv=2&biw=1366&bih=638&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiJvce9_aPRAhWBVCYKHSy6C0cQ_AUIBigB#safe=active&tb https://www.google.com/search?q=no+taxes+images&safe=active&espv=2&biw=1366&bih=638&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiJvce9_aPRAhWBVCYKHSy6C0cQ_AUIBigB#safe=active&tbm=isch&q=no+taxes+images+countries&imgrc=qqHzgPHjD6umaM%3A https://www.google.com/search?q=person+thinking&safe=active&espv=2&biw=1366&bih=638&tbm=isch&imgil=INrrBKcYHU9wiM%253A%253BuqFJSEiB25Fh-M%253Bhttps%25253A%25252F%25252Fwww.clipartsgram.com%25252Fa-person-thinking-clipart-447&source=iu&pf=m&fir=INrrBKcYHU9wiM%253A%252CuqFJSEiB25Fh-M%252C_&usg=__rTcW15dgkzNq7RpZTjX_P8nZ2yY%3D&ved=0ahUKEwidkt6jgKTRAhXD8CYKHRumDtIQyjcIKg&ei=C5BqWN3gLsPhmwGbzLqQDQ#imgrc=_ https://www.google.com/search?q=Why+do+you+think%3F&safe=active&espv=2&biw=1366&bih=638&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj_x62TgqTRAhXJeCYKHVF6Aq8Q_AUIBigB&dpr=1#safe=active&tbm=isch&q=Why+do+you+think+with+cell+phone&imgrc=IZI4Uv3C9U8QTM%3A https://www.google.com/search?q=uncle+sam+money&safe=active&espv=2&biw=1366&bih=638&tbm=isch&imgil=YU7j3sBG7vGtJM%253A%253B0Rsk3ZgQ8LKcZM%253Bhttps%2 https://www.google.com/search?safe=active&noj=1&tbm=isch&sa=1&q=hybrid+cars&oq=hybrid+cars&gs_l=img.3..0l10.15459.18513.0.18831.11.8.0.3.3.0.112.679.7j1.8.0....0...1c.1.64.img..0.11.700...35i39k1j0i67k1.6dRrI4gervM

Warm Up on your ½ sheet 1. How much money you want to be earning (per year) when you are 30. 2. What percentage do you think that income has to pay to the government in taxes (in the US).

In reality… US Federal Tax Rates: (only 3 % of Americans make over $250,000) Add 10 -15 % more depending on which state you work in 3. On your ½ sheet how much in tax would you would pay?

Net Income Gross income: How much you earn Net income: how much you keep Net income = gross income - gross income*tax rate For example: Mr. Klein made $37,500 last year. Net income = $37,500 - $37,500(.25) Net income = $37,500 - $9,375 = $28,125 4. How much is your “net income”?

Income Tax in USA IRS – tax collection agency in USA IRS manual – 70,000 pages (4 X size of the Bible) Taxes are deducted throughout year Every citizen must file every year by: If you paid more during the year then you need to: you get a refund If you paid less during the year then you need to: pay the difference

Taxes: For Example For example: Mr. Klein made $37,500 last year. Net income = $37,500 - $37,500(.25) Net income = $37,500 - $9,375 = $28,125 If Mr. Klein paid $10,375 in 2010, what happens after he files? Why is a BIG refund not such a great idea?

What are “Good Taxes”? According to Adam Smith: Simple to understand Avoid negative incentives Avoid loopholes

Loopholes Tax incentives Really, ways to not pay tax “write offs” Thousands of examples:

What Are Tax Deductions & Credits? Tax Deduction – reduction of your taxable income Lowers the overall amount (base) you will be charged a tax on Examples: local taxes paid, student loans, charitable contributions, home mortgage interest These are deducted b/c they were already paid to a gov’t agency or charity Tax Credit – reduces the actual tax Government encourages public to purchase specific products for the benefit to the general public Example: Hybrid cars, energy efficient windows/appliances Helps in reducing other bills for government long term

How Do You Know What to Pay?