Ch 14 Taxes and Government Spending

Sec 1 What are Taxes? STGs: Understand, explain, analyze, identify… 1.How gov’t uses taxes to pay for programs 2.The roots of the concept of taxation in the U.S. Constitution & the U.S. Supreme Court 3.Types of tax bases and structures 4.Characteristics of a good tax 5.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:

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

Types of Tax Structures pg 360, Figure 14.1 Type of TaxDescriptionMethodExample #1 Ron’s taxes on $50,000 income Example #2 Mary’s taxes on $150,000 income ProportionalFlat Tax ProgressiveIncome Tax RegressiveSales Tax

Characteristics of a Good Tax 1.S 2.E 3.C 4.E

Sec 2 Federal Taxes STGs: Understand, explain, analyze, identify… 1.The process of paying individual income taxes 2.The basic characteristics of corporate income taxes 3.The purpose of Social Security, Medicare and unemployment taxes 4.Other types of taxes

How does gov’t know how much you owe for taxes? How does the process work? 1.Withholding taxes 2.Pay as You Go 3.File a Tax Return 4.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/ProgramSourcePurpose Social SecurityFICA – based on your income MedicareFICA Unemployment TaxBased on your income. You can’t collect it IF you don’t pay into this fund.

Other types of taxes… Type of TaxExplanation/Example

Sec 3 Federal Spending STGs: Understand, explain, analyze, identify… 1.Difference between mandatory and discretionary spending 2.Major entitlement programs 3.Categories of discretionary spending 4.Impact of federal aid to state and local governments

Difference between mandatory and discretionary spending Spending TypeDefineExamples (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 – Pie Chart and Pgs List the 3 largest types/categories of Discretionary Spending

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:

Sec 4 State and Local Taxes & Spending STGs: Understand, explain, analyze, identify… 1.How states use a budget to plan spending 2.Where state taxes are spent 3.The major sources of state tax revenue 4.Local government spending and sources of revenue

How states use a budget to plan spending Budget TypeEExplanation Operating Budget Capital Budget

Where state taxes are spent 1. P 2. H 3. E 4. A 5. A 6. W

State Tax Revenue What CAN’T be taxed? What IS taxed? 1.S 2.State I 3.C 4.Other: 1.Savings accounts 2.Inheritance 3.Car Registration 4.Dog License AND MORE

Pg 379, Figure List the 5 largest of each. LOCAL GOV’T REVENUE SOURCES AND SPENDING REVENUE SOURCESSPENDING