Tax basics

More info at inflateyourmind Tax Categories Progressive taxes The tax rate increases are one earns more. Ex: U.S. Federal Income Tax Regressive taxes The lower-wage earners pay a larger percentage of their income Ex: sales tax, property tax Proportional taxes Flat tax (everyone pays the same) Ex: flat-rate income taxes, gross receipts taxes, occupation taxes, amusement admission taxes Source: http://www.ehow.com/info_12028156_difference-between-progressive-regressive-proportional-taxes.html More info at inflateyourmind

Main Tax Assessments Federal withholding State withholding Federal Income Tax Social security / Medicaid State withholding State Income Tax Unemployment / Disability Local withholding Township taxes Property taxes Sales tax (consumptive)

Other Tax Assessments Estate tax – collected by the federal government after debts are settled and before heirs collect Inheritance tax – charged by the state to heirs Excise tax – indirect tax charged on tobacco, alcohol and gasoline; included in the price. (read more at Wikipedia) Luxury tax – charged on non-essentials (read more at Wikipedia, Investopedia and theNest Capital gains – on investments such as stocks, bonds, and real estate (max 20%) Taxes paid by businesses Corporate income tax (39.1%) Payroll taxes (FICA and Medicare) The estate tax is a tax on the total amount of the estate, after creditors are paid but before any heirs get their bequest. The tax is paid by the estate itself. Inheritance tax is paid by those who receive a portion of the estate (heirs). Source: http://money.howstuffworks.com/personal-finance/personal-income-taxes/inheritance-tax1.htm

History of Federal Tax Withholding 1791 – 1802 U.S. government funded by internal taxes on distilled spirits, carriages, refined sugar, tobacco and snuff, property sold at auction, corporate bonds, and slaves. 1817 Congress stopped all internal taxes – collected tariffs on imported goods 1862 Civil War – first income tax law 3% on incomes above $600, and 5% for incomes above $10,000. 1872 income tax eliminated during the Reconstruction Switched to collecting taxes on tobacco and distilled spirits http://www.infoplease.com/ipa/A0005921.html#ixzz2ia25hytg

History of Federal Tax Withholding 1895 - the U.S. Supreme Court declared income taxes unconstitutional because it was not apportioned among the states in conformity with the Constitution. 1913 Sixteenth Amendment Ratified allowed for direct taxation and made income tax permanent 1% on incomes above $3,000 and 6% above $500,000 Tax withholding increased during WWI 77% on incomes over $1 million. As high as 92% during WWII 1937 Congress ratified the Federal Insurance Contributions Act (FICA) http://www.infoplease.com/ipa/A0005921.html#ixzz2ia25hytg

Why does the government collect income taxes They have expenses and bills to pay. Many people would not pay if they were not forced to. “The government needs to collect taxes to keep certain industries in the nation running. In America, taxes are collected only on selected goods and items. Food, for example, is not taxed in most locations in the United States”. Quote from ask.com

Where does the money come from? Image from https://media.nationalpriorities.org/uploads/revenue_pie,__2015_enacted.png

2018 Tax Brackets

2016 Tax Brackets More info at irs.gov Image from http://taxfoundation.org/sites/taxfoundation.org/files/docs/2017TaxBrackets.png/ More info at irs.gov

Tax Distribution Image from http://taxfoundation.org/blog/how-much-do-people-pay-taxes

Where is the money going? Federal 2016 2016 spending from https://lh5.googleusercontent.com/Rv5UHrNsvcucvflDwwz_pqEjjHnbQeE_HoAgEM44mGOwutlLCyMopUBTlKW_j1krJ775qI5DGZLYlEB8z7I3mD5BllP27Iq4URRWPE-vV3hfqv4wYgLtmDm3D_Z_hAlEMc-s1yA

Where is the money going? Federal 2017 Your 2014 Taxpayer Receipt

Where is the money going? Federal 2015 Image from https://media.nationalpriorities.org/uploads/total_spending_pie,__2015_enacted.png

Where is the money going? Federal 2014 Image from https://media.nationalpriorities.org/uploads/total_spending_pie,__2015_enacted.png

Where is the money going? Federal 2013 More information at: bayoureference and Where Did My Tax Dollars Go? Image from http://nationalpriorities.org/media/uploads/federal_budget_101/Figure8.2.png

Where is the moxney going? State Image from http://www.theatlantic.com/business/archive/2014/04/how-america-pays-taxes-in-10-not-entirely-depressing-charts/360647/

Pennsylvania State Spending More information: Pennsylvania State & Local 2014 Spending by Function

Where is the money going? Local Image from http://wunc.org/post/why-state-budget-process-so-different-way-local-budgets-are-crafted#stream/0

Summary We pay taxes to fund services that government provides. Taxes are assessed on …. Wages (earned income taxes) Property (property and school taxes) Purchases (consumption, excise, luxury taxes) Estate and inheritance taxes

Assignment Read the article “Taxes and the Consumer.” Answer the questions on the back. You can work with a partner but everyone should hand in a paper. I do this because you may disagree on some answers. Make sure to write you name on the paper before you hand it in.