Taxes and Government Spending Chapter 14

What are taxes? »A required payment to a local, state, or federal government »Becomes government revenue

Constitution »Social Contract »Constitution »Article 1 »Limits to taxation »For Common defense »For general welfare »No taxes on churches »No taxes on exports

Tax Bases & Tax Structure »Tax base: the income, property, goods, or services subject to taxes »Income tax (corporate & personal) »Sales tax »Property tax

Tax Structure »Proportional: »percentage of income paid in taxes remains the same for all incomes »Progressive »Percentage of income paid in taxes increases as income increases »Regressive »Percentage of income paid in taxes decreases as income increases (sales tax)

Characteristics of a Good Tax »Simplicity »Efficiency »Certainty »Equity »Fair: benefits received »Fair: ability to pay

Tax Revenue and Tax Rates »Laffer Curve

Taxes »Changes price of product »Supply »Demand »Incidence of a Tax: final burden of a tax

Federal Tax »Individual Income Tax »Corporate Income Tax »Social Security, Medicare and Unemployment taxes »Other Taxes »Excise »Estate »Gift »Import

Income Tax: Personal & Corporate »Pay as you earn »Withholding »Filing tax return »Taxable income »Personal exemptions »Deductions »Tax bracket

Federal Insurance Contribution Act »Social Security »1935 Old Age Survivors and Disability »Medicare »National health insurance program for people over 65

Unemployment Tax »Paid by employers »Insurance policy for workers who might be laid off »California borrowed $40 million a day during the Great Recession »raise the taxable base from $7,000 (CA has the lowest allowable base), »raise the maximum tax rate »reduce the maximum weekly benefit.

Other Taxes »Excise tax: tax on sale or manufacture of goods - gasoline, cigarettes, alcohol »Estate tax: tax on property left by a dead person, prior to inheritance »Gift Tax: money or property given to a living person; to keep people from avoiding estate tax; give up to $10,000 tax free

Other taxes »Import Tax or tariffs »Goods brought into USA from another country »Limits competition »Tax incentive: sin taxes-- encourage people no to smoke, drink alcohol

Federal Spending »Mandatory required by existing law »Discretionary »Government planners can make a choice

Mandatory »Entitlement Programs »Social security: future »Medicaid »Supplemental Security Income »Food stamps »Veterans Benefits »Unemployment Insurance

Discretionary »Defense »Military »Civilians working for the military »Education »Training »Scientific research »Student loans »Technology »Parks »Law enforcement »Environmental cleanup »Housing »etc »Education »Training »Scientific research »Student loans »Technology »Parks »Law enforcement »Environmental cleanup »Housing »etc

Federal Aid »State »Local »Emergency relief »Programs »Education »highways

State and Local Taxes & Spending »State Budgets »Operating budget »Capital budget »Balanced Budgets

State Spending »Education »Public safety »Highways / transportation »Public welfare »Arts & Recreation »Administration

State Revenue »No tax »Federal property »Nonprofit organizations »Religious groups »Charities »Tax Exempt

State Taxes »Sales tax »State income tax »Corporate income tax »Property tax »Real property - land »Tax assessor »Personal property - jewelry, stocks

Local Government Spending and Revenue »City »County »87,000 local government units »Water district »School districts

Local Government Jobs »Public schools »Law enforcement »Fire protection »Parks »Public health »Public transportation »Elections »Record keeping »Social services »Public transportation »Elections »Record keeping »Social services