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 - the percentage of income paid in taxes decreases as income increases in taxes decreases as income increases …example?? …example?? – sales tax – sales tax - everyone pays the same rate, - everyone pays the same rate, regardless of income 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 x x x … cross multiply…. 25,

What are the major types of taxes? 1. Personal income tax 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 and deductions  exemptions – - set amounts subtracted - set amounts subtracted for yourself, spouse, for yourself, spouse, & dependants & dependants

ddd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 -p-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 $102, $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

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

6. Property taxes 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 - regressive

Federal revenue $$$$1.1 trillion - I I I I I nnnn dddd iiii vvvv iiii dddd uuuu aaaa llll i i i i nnnn cccc oooo mmmm eeee t t t t aaaa xxxx $$$$869.6 billion - S S S S S oooo cccc iiii aaaa llll S S S S eeee cccc uuuu rrrr iiii tttt yyyy and other payroll taxes $$$$370.2 billion - C C C C C oooo rrrr pppp oooo rrrr aaaa tttt eeee i i i i nnnn cccc oooo mmmm eeee t t t t aaaa xxxx $$$$65.1 billion - E E E E E xxxx cccc iiii ssss eeee t t t t aaaa xxxx eeee ssss $$$$26.0 billion - C C C C C uuuu ssss tttt oooo mmmm ssss d d d d uuuu tttt iiii eeee ssss $$$$26.0 billion - Estate and g g g g g iiii ffff tttt t t t t aaaa xxxx eeee ssss $$$$47.2 billion - Other

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