2.  Money paid by  people and businesses  Money paid to  local, state and federal government  Everyone! Has to pay taxes

3. Progressive Tax  Percentage of income paid in taxes increases  as income increases  Example: Federal Income Tax Regressive Tax  Percentage of income paid in taxes decreases  as income increases  Example: Sales tax (most taxes are regressive) Proportional Tax  A flat tax; stated as a percentage which remains the same no matter what your income level

4. IncomeTax RateYou Pay $1,00010.1%$101 $10,00010.58%$1058 $100,0028%$28,000 $200,00033%$82,500 $400,00039.6%$158,400 (Filing Status: Single)

5. New Computer Price: $1,000 Sales Tax: 8% or $80 Shannon’s Income: $10,000 $80 /$10,000 =.008 Brandon’s Income: $5,000 $80/ $5,000 =.016 (Brandon pays > % of his income in taxes)

6. Flat Tax Rate: Stated as a percentage!!! 6% or.06 Ashley’s Income: $200,000(.06) Asia’s Income: $50,000(.06)

7. 1. Simple- easy to understand 2. Efficient- easy for government to collect 3. Equity (fair)- no one should pay too much or too little 4. Certain-tax date, amount due, how to pay “SEEC”

8. Tax base- refers to what is being taxed Examples of Tax Base:  Individual income (earnings)  Company profits  Property tax- real estate, auto  Sales tax- goods and services

9. Medicaid- low income families Medicare- health insurance for seniors 65 years and older Social Security -income (money) for retired people

10. 1.“Pay-As-You-Earn”- Income Withholdings 2. FICA -Federal Insurance Contribution Act a. Social Security - 6.2% Tax b. Medicare- 1.45% Tax c. Total Tax: 7.65%

11. Filing a Tax Return Form used to file income tax return Tax deductions- subtracted from gross income Personal exemptions- self, spouse and dependents Taxable income- amount you pay taxes on after deductions and exemptions

12. Excise Tax- taxes on certain goods made in the US Examples: Perfume, alcohol, and tobacco, gasoline Unemployment Tax -states collect from your employer to pay unemployment benefits (safety net) Tax Incentive – used to encourage or discourage types of behavior Examples: Tax on liquor and cigarettes, marijuana Tax Credit – used to encourage activities Examples: Energy saving home improvements, building factories, movie production…