Types of Taxes

Types of Taxes Proportional Tax- A tax for which the % of income paid in taxes remains the same for all income levels Also called a flat tax, everyone pays the same rate Example: Some state income taxes are the same rate for every taxpayer

Types of Taxes Progressive Tax- A tax for which the % of income paid in taxes increases as income increases As people make more, a larger % is taken for federal taxes Those who make less than the minimum pay no fed. Tax Example: Federal personal income tax

Types of Taxes Regressive Tax- A tax at a flat rate without regard to the level of a taxpayers income or ability to pay The tax takes a larger % of lower incomes than higher incomes Falls hardest on those with lower income Example: State sales tax on food (not in Ohio)

Other Types of Taxes Direct- A tax that cannot be shifted to another Example- income and property taxes Indirect- Tax that increases the price of a good so consumers are paying more for the products Example- fuel and cigarette taxes

Where does your money go? Gross pay- total salary before deductions are taken out Net pay- amount of pay after taxes and deductions are taken out Deductions- money taken out for retirement and medical/dental plans Taxes taken out- Federal, State, City/Local Social Security- Fed. Program to help unemployed, disabled, over 65 Medicare- Fed. Health insurance 65 and over

Before Tax Deductions 401(k)- Investment toward a employee’s retirement No taxes paid until the money is taken out Mutual fund- investments where one trades in securities like stocks and bonds