Hey, did you hear the one about………… What are the 2 things in life you can always count on ??? Death ……. …….aaaand…….

Taxes “I’m taxes.”

How are taxes structured? 3 types of tax structures: 1. proportional – the percentage of income paid in taxes remains the same for all income levels -- “flat tax” 2. progressive – the percentage of income paid in taxes increases as income increases -- example – Federal income tax

Progressive tax structure – Federal income tax

3. Regressive - the percentage of income paid in taxes decreases as income increases …example?? – sales tax - everyone pays the same rate, regardless of income

What do YOU think??? …should income tax be proportional, regressive, or progressive??

Activity……… ……”A Taxing Argument”

Activity …..do the math…. “Richard and Phoebe” worksheet …like this… 3000 = x … cross multiply…. 25,000 100

What are the major types of taxes? 1. Personal income tax determined on annual basis withholding - $ taken out of paychecks based on estimate of what will be owed if more $ is withheld than owed, refund is received when taxes are filed

if not enough $ is withheld, $ will be owed taxable income = gross income minus exemptions and deductions exemptions – - set amounts subtracted for yourself, spouse, & dependants

deductions – variable amounts deducted from gross income - includes interest on mortgage, charity, etc Personal income taxes make up close to 50% of Federal revenue

personal income tax = a progressive tax

2. Corporate income tax businesses can take many deductions makes up about 15% Federal revenue progressive tax

Who the heck is Fica, and why is he getting so much of my money???? Federal Insurance Contributions Act 3. Social Security and Medicare tax - Social security – OASDI … …Old Age Survivors Disability Insurance - Medicare – health insurance for 65 & older - income cap - 2008 - $102,000 2009 - $106,800 - regressive tax

……Taxes and more taxes….. 4. Excise tax - tax on the sale or manufacture of a good - gasoline, cigarettes, alcohol, telephone, cable, etc - tax incentive – use of taxation to encourage or discourage behavior ……”sin tax” - regressive tax 5. Estate & gift taxes

estate tax – on value of money & property of a person who has died gift tax – on money or property one living person gives another progressive taxes – rate increases as value increases

6. Property taxes - local gov’t tax - based on value of property - usually fixed dollar amount per $1000 assessed value - regressive 7. Sales tax - state & local

Federal revenue - 2007 $1.1 trillion - Individual income tax $869.6 billion - Social Security and other payroll taxes $370.2 billion - Corporate income tax $65.1 billion - Excise taxes $26.0 billion - Customs duties $26.0 billion - Estate and gift taxes $47.2 billion - Other

… Ok, so where does all this money go?? $586.1 billion (+7.0%) - Social Security $548.8 billion (+9.0%) - Defense[2] $394.5 billion (+12.4%) - Medicare $294.0 billion (+2.0%) - Unemployment and welfare $276.4 billion (+2.9%) - Medicaid and other health related $243.7 billion (+13.4%) - Interest on debt $89.9 billion (+1.3%) - Education and training $76.9 billion (+8.1%) - Transportation $72.6 billion (+5.8%) - Veterans' benefits $43.5 billion (+9.2%) - Administration of justice $33.1 billion (+5.7%) - Natural resources and environment $32.5 billion (+15.4%) - Foreign affairs $27.0 billion (+3.7%) - Agriculture $26.8 billion (+28.7%) - Community and regional development $25.0 billion (+4.0%) - Science and technology $20.5 billion (+0.8%) - Energy $20.1 billion (+11.4%) - General government 2007

Capital and Operating Budgets Capital Budget – expenditures on major projects and investments Operating Budget – the day to day expenditures