Current Event  The Air Car  Factories will likely be up and running to make these cars around  Compressed air is used to drive pistons instead of combusting gas.  A small gas-powered motor in the car runs an air compressor.  But you can go 60 miles on a single tank of compressed air.

 The cars will cost around $20,000.  The Chevy Volt out in November is expected to cost in the mid to high 30s.  A tax credit of around $7500 will apply to both.

Percentages (A Review)  Percent means “per one hundred”.  10% means 10/100.  Which also means 1/10.  If you have a calculator, you can divide tax amount by income.  Person A makes $50, pays $5 in taxes.  Person B makes $25, pays $5 in taxes.  What percent of their income did each pay?

Problem #1  Joe Dirt earned $20,000 in He paid $6,000 in income taxes.  Ritchie Rich earned $250,000 that year. He paid $6,000 in income taxes.  A) What percent of his income did Joe pay?  B) What percent of his income did Ritchie pay?

Problem #2  Joe Dirt earned $20,000 in He paid $2,000 in income taxes.  Ritchie Rich earned $250,000 that year. He paid $25,000 in income taxes.  A) What percent of his income did Joe pay?  B) What percent of his income did Ritchie pay?

Problem #3  Joe Dirt earned $20,000 in He paid $2,000 in income taxes.  Ritchie Rich earned $250,000 that year. He paid $62,500 in income taxes.  A) What percent of his income did Joe pay?  B) What percent of his income did Ritchie pay?

Problem #4  Joe Dirt earned $20,000 in He was living paycheck to paycheck, & couldn’t afford to save any money.  Ritchie Rich earned $250,000 that year. He saved 50% of his income.  Sales tax in their state is 7% on all purchases.  A) How much money did Joe pay in sales taxes?  B) How much money did Ritchie pay in sales taxes?  C) What percent of his income did Joe pay in sales tax?  D) What percent of his income did Ritchie pay in sales tax?

Look at your paper. Which income tax system do YOU think is most fair?  A) Problem 1  B) Problem 2  C) Problem 3

Regarding income tax  A) everyone should pay the same percent of their income.  B) the wealthy should pay a higher percent of their income than the poor.  C) the poor should pay a higher percent of their income than the wealthy.

Look at your paper. Which income tax system is most like our actual income tax?  A) Problem 1  B) Problem 2  C) Problem 3

Who would be hurt MORE by a higher sales tax?  A) Joe  B) Ritchie

I think the dumbest tax is the  A) sales tax  B) income tax  C) property tax  D) excise tax (taxes on specific things like cigarettes, alcohol, gasoline)

I think the best tax is the  A) sales tax  B) income tax  C) property tax  D) excise tax (taxes on specific things like cigarettes, alcohol, gasoline)

Should the government tax unhealthy foods (soda, fast food, donuts, etc.) to keep health care costs down?  A) Yea!  B) Nay!

Right now, I believe the government should  A) cut taxes and cut spending.  B) cut taxes and leave spending unchanged.  C) cut taxes and increase spending.  D) raise taxes and cut spending.  E) raise taxes and leave spending unchanged.  F) raise taxes and increase spending.

Say the government decides to tax prescription drug companies for each sale they make. Who is hurt most by that tax?  A) The drug makers.  B) The drug buyers.

Types of Taxes   Proportional tax - everyone pays same percentage of income (Medicare, 1.45%).   Progressive tax - higher percentage of total income paid by people with higher incomes (income tax).   Regressive tax - higher percentage of total income paid by people with lower incomes (sales tax).

Why progressive??  Marginal utility  Income inequality

 $10,000 income $1,000,000  $10,000 spends $800,000  $700 7% sales tax paid $56,000  7% percent of total income paid 5.6%  Poor guy pays higher percent of his income than rich guy in sales tax!

Problems   5) I make $20,000/yr and pay $4,000 in taxes. You make $100,000/yr and pay $10,000. What kind of tax is this?   6) I make $80,000/yr and pay $24,000 in taxes. You make $25,000 and pay $2,500. What kind of tax is this?   7) I make $150,000/yr and pay $30,000 in taxes. You make $200,000/yr and pay $40,000. What kind of tax is this?

Personal Income Taxes   ½ of the federal revenue.   Depending on amount withheld from checks, you could owe or get a refund.   progressive

2010 Income Tax Rates

 $4,681.25= [15% X (34,000-8,375)]

A guy who made $1,000,000 last year paid...  Step 1: $1,000,000 - $373,650 = $626,350  Step 2: 0.35 X $626,350 = $219,  Step 3: $219, $108, = $327, in taxes

8) The average high school teacher salary is $43,000 a year. How much does the average teacher pay in income taxes??

These dollar amounts get a little bigger every year. Why is that?

Tax Incentives  College education  Healthy lifestyle  Save and/or invest your money  Make your home more energy efficient/buy a more energy efficient car  Buy a home  Have babies  Some Tax Incentives Some Tax Incentives Some Tax Incentives

Current Event(s)  Proposed Tax on Sugary Beverages Debated –President Obama has said it is worth considering. –Coca-Cola calls the idea outrageous. –It’s estimated that a penny/ounce tax on sugary beverages would raise $14.9 billion in its first year.

 Last June, the soft drink industry created an organization called “Americans Against Food Taxes”. Americans Against Food TaxesAmericans Against Food Taxes  AAFT bought a full-page ad in the Washington Post last Sunday, and has been running commercials on CNN, MSNBC, and Fox News.

4. Which is most closely associated with a progressive tax?  A) sales tax  B) property tax  C) Medicare  D) income tax

7. Person A earns $20,000/yr & pays $2,000 in taxes. Person B earns $100,000/yr & pays $10,000. The tax they both paid was a:  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

8. Person A earns $20,000/yr & pays $2,000 in taxes. Person B earns $100,000/yr & pays $15,000. The tax they both paid was a:  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

9. 9. I make $50,000/yr and pay $10,000 in taxes. You make $100,000/yr and pay $15,000. What kind of tax is this?  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

I make $20,000/yr and pay $4,000 in taxes. You make $100,000/yr and pay $10,000. What kind of tax is this?  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

FICA Taxes   Social Security, Medicare (elderly/disabled).   SS proportional (6.2%) up to $107k; not paid above that. So it’s ultimately REGRESSIVE.   Medicare 1.45%

Are We Overpaying Grandpa?  As baby-boomers retire, more social security checks are going out.  People are living longer, and collecting SS longer.  Gov’t SS & health programs for the elderly spend about $40k/yr on average per elderly American.  That’s equal to the average American’s annual income.

II. FICA Taxes

III. Corporate Income Taxes   3 rd biggest source of revenue.

Listen   Basic corporate income tax brackets:   15% up to $50k   25% between $50k & $75k   34% $75k & up

V. State Gov’t Revenue Sources  1 st -Federal gov’t  2 nd -Sales tax  3 rd -State income tax (progressive)

VI. Local Gov’t Revenue Sources  1 st -State and Federal Gov’t  2 nd -Property taxes

The Flat Tax - Listen  Advantages:  Simple  Would eliminate loopholes  By reducing need for the IRS and accountants, could save up to $100 billion per year  Disadvantages:  Removes behavior incentives of current tax code  Benefits the wealthy at the expense of the poor.

Where They Get Their Money From  Federal Government –1:personal income tax (progressive) –2:FICA  Social Security (6.2%, capped at $102k)  Medicare (1.45%, proportional) –3:corporate income tax (progressive)  State Governments –1:Federal Government –2:sales tax (regressive) –3:state income tax (progressive)  Local Governments –1:Federal/State –2:property (usually progressive)

3. Medicare is a  A) Progressive Tax  B) Regressive Tax  C) Proportional Tax  D) Sin Tax

7. Person A earns $20,000 a year & pays $4,500 in taxes. Person B earns $100,000 a year & pays $10,000 in taxes. The tax they both paid was a:  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

8. Person A earns $20,000 a year & pays $2,000 in taxes. Person B earns $100,000 a year & pays $20,000 in taxes. The tax they both paid was a:  A) Sin Tax  B) Progressive Tax  C) Regressive Tax  D) Proportional Tax

I. Economic Impact of Taxes - Continued This could show the effect of a tax on prescription medicine. This might be the effect of a tax on candy bars.

Random Tax Stuff  The Obama Administration The Obama Administration The Obama Administration  Fair Tax Fair Tax Fair Tax  Freedom Works Freedom Works Freedom Works  Some tax incentives (in common language) Some tax incentives (in common language) Some tax incentives (in common language)