Stock Market Project  Please read hand out and see example

Quiz  Explain Cost Push inflation  Define Cyclical unemployment  Define Structural unemployment  What are the three phases of the business cycle?  What are the three tools of the Federal Reserve  What is the goal of the federal reserve?

Review  How do we measure our country’s economic growth?  GDP (Gross Domestic Product)  What kinds of goods are calculated in GDP?  Durable and nondurable, finished goods, made within US borders  What are the three economic indicators used to gauge health of economy?  Inflation, Unemployment, GDP  Why is real GDP more reliable than nominal GDP?  Real GDP using constant prices and eliminates calculation of inflation  If the winter is extra long and harsh this year, what happens to the demand for sidewalk salt? What determinant is that?  Increases. Right shift. Expectations.

Agenda  Extended Bellringer  Announcements:  Final exam  Personal Budget Project  Notes: Tax structures

Taxes

Brainstorm  What types of things are provided to us through the use of tax money?  Military protection  Schools  Roads  Entitlement spending  Social security  Parks and recreation  Administration

Why taxes?  The ability to tax is given to the government through the US Constitution  The Articles of Confederation failed miserably in large part to the inability to tax  As Citizens of the US, we authorize the government to levy taxes against us for our protection and welfare. Our representatives are supposed to keep it reasonable  Limited because of our history (revolution). Taxes must be for common defense and general welfare. Must be the same for every state.

Three types of taxes  Tax: Required payment to a local, state, or national government  Income tax: tax paid out of income (pay check)  Corporate tax: tax paid by business owners out of profit  Social security tax: half paid by individual from income, other half paid by employer

“Other” taxes  Sales tax: Tax paid on purchased goods and services  Excise tax: Tax paid on certain items such as alcohol and tobacco to discourage purchase  Property tax: Tax paid on value of property owned  Federal Insurance Contributions Act (FICA): taken from paychecks to fund social security and medicare

Taxable Income  Gross income made from employer – deductions = taxable income  Deductions: all types! Established by government to ease burdens  Childcare costs  Head of household  Mortgage interest  Student loan interest  Capital losses  Donations to charity

Tax Structures  Proportional taxes: Percentage of income paid in taxes is the SAME for all income levels (6% if you make $500k or $50k)  Progressive taxes: Percentage paid INCREASES as your income INCREASES (6% for $500k, 4% for $60k)  Regressive taxes: Income paid for taxes DECREASES as your income INCREASES (3% for $500k, 6% for $60k)  Rationale: those with less income will use more government services so should pay more. Less taxes take from rich means more they will be able to spend to stimulate economy.

Characteristics of a good tax  Simplicity  All citizens able to understand  Efficiency  Able to collect and monitor without spending too much time and money  Fairness  No one bears too much or too little of tax burden

Filing Taxes  Taxes are taken out of pay based on your income level and basic deduction level (W-4)  In January, you receive a W-2 form from every employer you had that states how much you made and how much money was paid in taxes for Federal, State, Local, and FICA taxes  You (or your tax guy) calculates the taxes you are responsible for and adjusts for any deductions. This makes sure you paid the correct amount. If you overpaid, you get a refund. If you underpaid, you pay the difference.

Federal Budget

Exit Ticket Progressive Tax Structure Proportional Tax Structure Regressive Tax structure Question: Which tax structure is the most fair in your mind? Why?