Chapter 14

 The Government’s Authority to Tax  Purpose of Taxation  The Power to Tax ▪ 1 st Power given to Congress  Limits on the Power to Tax ▪ “for the common defense and general welfare” ▪ Federal taxes must be the same in every state

 Tax Structures  Progressive: more I make, the more they take  Proportional: percentage is the same at all income levels  Regressive: the less I make, the more they take  Tax Bases  Individual income  Corporate income  Property tax  Sales tax

 Who Bears the Burden?  Characteristics of a Good Tax  Simplicity  Efficiency  Certainty  Equity  Balance Fairness, Revenue, and Rates

 Individual Income Taxes  “Pay-as-you-earn” Taxation (39% of Federal Revenue in 2009)  Tax Brackets  Tax Withholding  Filing a Tax Return ▪ Taxable income, personal exemptions, tax deductions, and tax credits  calculator.asp calculator.asp

 Corporate Income Taxes  Social Security, Medicare, and Unemployment Taxes (FICA)  OASDI; started in Great Depression  Medicare (health insurance for those over 65)  Unemployment; paid by employers  Other Types of taxes  Excise, estate tax, gift tax, tarrifs

 Mandatory Spending  Money that Congress is required by existing law to spend on certain programs  SS, Medicare, Debt  Discretionary  Spending which lawmakers are free to make  Education, defense

 Entitlement Programs  Social Security  Medicare  Medicaid  Food Stamps  Healthcare?????

 Discretionary Spending  Defense Spending  Education  Law enforcement  Student loans  Salaries of civilian branches of federal government  Federal Aid to States and Local Governments

 State Budgets  Operating Budgets  Capital Budgets  Balancing State Budgets

 Where Are State Taxes Spent?  Education, Public Safety, Highways and Transportation, Public Welfare, Arts and Recreation, Administration  State Tax Revenue  Sales Tax, Individual Income Tax, Corporate Income Tax, Licensing Fee

 Local Government Spending and Revenue  Forms: Townships, counties, towns, cities, school districts  Job: Law enforcement, schools, public facilities, public health, elections, record keeping  Property Taxes  Sales Taxes