Aim: How does money work? Do Now: V.Finkelshteyn Staten Island Tech HS – Economics Money/Tax What makes a $100 bill worth $100? A $100 bill is an example of fiat money and it has worth because the government has declared that it does. It works as money because it is durable, portable, divisible, uniform, scarce, and accepted by all

Money Medium of Exchange used to determine value during the exchange of goods and services Unit of account that provides a means for comparing the values of goods and services Store value – money keeps its value if you decide to hold on to it instead of spending it Characteristics of Money – Currency (paper & coins) DurabilityPortabilityDivisibilityUniformity Limited Supply Acceptability

Income Employment Earnings Rent Earnings Investment Earnings Gifts/Inheritance Earnings Wages and Salary Bonuses HOW MUCH OF THIS IS TAXABLE INCOME? ALL INCOME IS TAXABLE

Income Deductions What gets taken out of your paycheck? –Federal Income Tax –State Income Tax –Local Income Tax –Social Security –Medicare –Union Fees –Health Insurance –Retirements contributions –Alimony Payments

Tax Structures ProportionalProportional – constant percentage of income is taken in taxes as income increases (Flat tax) ProgressiveProgressive – a larger percentage of income is taken in taxes as income increases (Income tax) RegressiveRegressive – a smaller percentage of income is taken in taxes as income increases (sales tax)

Tax Brackets In the United States we have what is called a “progressive income tax,” - as your taxable income rises, additional income is taxed at higher rates. A person with a taxable income of less than $8025 in 2010 will pay 10% of their income in taxes. Those who make more than $8025 will pay 10% on that income ($802.50) plus a higher rate for all income over that amount. We say the person is in the 10% tax bracket until their income rises above that $8025 level, at which point they move into a higher tax bracket. The tax rate rises to a maximum of 35% on income in excess of $357,700 (the person is then in the 35% tax bracket).

25,000 50,000 75, ,000 15% 25% 15% 25% 30% 15% of 25,000 = 3,750 Total Tax = $23,750 25% of 50, 000 = 12,500 30% of 25,000 = 7,500 Progressive Income Tax Model

Tax BracketSingleMarried Filing Jointly 10% Bracket$0 – $8,375$0 – $16,750 15% Bracket$8,375 – $34,000$16,750 – $68,000 25% Bracket$34,000 – $82,400$68,000 – $137,300 28% Bracket$82,400 – $171,850$137,300 – $209,250 33% Bracket$171,850 – $373,650$209,250 – $373,650 35% Bracket$373,650+ IRS – Income Tax Bracket for 2010 IRS – Internal Revenue Service

State Income Tax Brackets New York $0 - $8, %$0 - $16, % $8,001 - $11, %$16,001 - $22, % $11,001 - $13, %$22,001 - $26, % $13,001 - $20, %$26,001 - $40, % $20,001 - $200, %$40,001 - $300, % $200,001 - $500, %$300,001 - $500, % $500, %$500, % What are tax rates for New York City?

What is a Tax Refund? An amount that the government gives back to a taxpayer who has paid more taxes that were due Federal and state taxes are withheld at a specified amount each pay period, and when the year ends, each tax payer must file income taxes by submitting the proper filing forms. In many cases, people have paid more than they were required to pay. When the federal government or state treasurer receives the tax forms, they issue checks for overpayment. This is a tax refund. When are Taxes Due? April 15 th April 15 th

Matching Terms 1.Regressive tax 2.Proportional tax 3.Individual income tax 4.Deductions 5.Withholding 6.Commodity money 7.Federal Reserve System 8.Fiat money 9.Interest 10.Principal 11.Representative money 12.Default A.Failure to pay back a loan B.Objects that have value because the holder can exchange them for something else of value C.A tax for which the percentage of income paid in taxes decreases as income increases D.Variable amounts that you can subtract from your gross income E.The central banking system of the United States F.A tax for which the percentage of income paid in taxes remains the same for all income levels G.Taking tax payments out of an employee’s pay before he/she receives it H.The amount of money borrowed I.A tax on the amount of money a person earns J.The price paid for the use of borrowed money K.Objects that have value in themselves and that are also used as money L.Money that has value because the government has ordered that it is an acceptable means of payment

Start of YrPrincipal $Interest 5%End of Yr $ Compound Interest on savings