Taxes and Government Spending Ch 14 Taxes and Government Spending

Sec 1 What are Taxes? STGs: Understand, explain, analyze, identify… How gov’t uses taxes to pay for programs The roots of the concept of taxation in the U.S. Constitution & the U.S. Supreme Court Types of tax bases and structures Characteristics of a good tax Who bears the tax burden

Where does it come from? Where does gov’t get the money to pay for programs? Where do taxes come from? So, in the end, who pays for the programs offered by the gov’t?

TAXES & The Constitution Q: Does government have the authority to tax you? A: YES. Q: Where? A: Source in Constitution: Article I, Section 8, Clause 1: To lay and collect taxes, imposts and excises, to pay the debts, and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.

Tax Bases What can be taxed? Methods: P I G S Individual income tax Sales tax Property tax Corporate income tax

Types of Tax Structures pg 360, Figure 14.1 Type of Tax Description Method Example #1 Ron’s taxes on $50,000 income Example #2 Mary’s taxes on $150,000 income Proportional Flat Tax Progressive Income Tax Regressive Sales Tax

Characteristics of a Good Tax

Sec 2 Federal Taxes STGs: Understand, explain, analyze, identify… The process of paying individual income taxes The basic characteristics of corporate income taxes The purpose of Social Security, Medicare and unemployment taxes Other types of taxes

Withholding taxes Pay as You Go File a Tax Return Tax Bracket How does gov’t know how much you owe for taxes? How does the process work? Withholding taxes Pay as You Go File a Tax Return Tax Bracket

Basic characteristics of corporate income taxes Progressive Tax Rate Corporations have many deductions (more than individuals) that reduce their taxable income.

The purpose of Social Security, Medicare and unemployment taxes Tax/Program Source Purpose Social Security FICA – based on your income Medicare FICA Unemployment Tax Based on your income. You can’t collect it IF you don’t pay into this fund.

Other types of taxes… Type of Tax Explanation/Example 1. 3. 4. 5.

Sec 3 Federal Spending STGs: Understand, explain, analyze, identify… Difference between mandatory and discretionary spending Major entitlement programs Categories of discretionary spending Impact of federal aid to state and local governments

Difference between mandatory and discretionary spending Spending Type Define Examples (Pg 371, Figure 14.6) List all Mandatory Spending Discretionary Spending Which one is Required?

Major entitlement programs – Pg 372 Are these Discretionary or Mandatory? Why are such programs called “Entitlement Programs”? Entitlement Programs are “Means-Tested”. What does that mean? Can these types of programs be cut easily? Why or why not?

Categories of Discretionary Spending Pg 371, Figure 14.6 is outdated. Go Online to update the numbers. Use Federal Spending 2017 by Congressional Budget Office President Trump's Proposed 2018 Budget List the 3 largest types/categories of Discretionary Spending

Sec 4 State and Local Taxes & Spending STGs: Understand, explain, analyze, identify… How states use a budget to plan spending What part of the budget must be balanced? Capital Budget or Operating Budget? Where state taxes are spent The major sources of state tax revenue Local government spending and sources of revenue

Impact of federal aid to state and local governments List 6 areas/programs where State Gov’ts receive aid/money from the Federal Gov’t:

How states use a budget to plan spending Budget Type EExplanation Operating Budget Capital Budget

Where state taxes are spent California Budget

LOCAL GOV’T REVENUE SOURCES AND SPENDING Use the pie chart on prior slide to fill in the lines below. (Pg 379 Pie charts) LOCAL GOV’T REVENUE SOURCES AND SPENDING REVENUE SOURCES (Left Pie Chart) SPENDING (Right Pie Chart)

State Tax Revenue What CAN’T be taxed? What IS taxed? S State I C Other: Savings accounts Inheritance Car Registration Dog License AND MORE

Reminder Write the Answers for: STGs Assessment Questions Fill in details