2. “The income tax law is a lot of bunk. The government can’t collect legal taxes from illegal money.” Al Capone

3. Source #6 Low Tax Rates People will produce more when they are permitted to keep more of what they earn.

4. Where do taxes come from?

5. Who pays taxes?

6. Levels of Household Income Earners and their Proportion of the Federal Income Tax in 2005 The Top 10 Percent of Income Earners Paid 70 Percent of Federal Income Tax

8. High Marginal Tax Rates 1. Discourage work effort and reduce the productivity of labor. 2. Reduce both the level and efficiency of capital formation. 3. Encourage individuals to consume tax-deductible goods when nondeductible goods may actually be more desirable.

9. Marginal Tax Rates For Single Status (2015): $0-$9,225 = 10% $9,226 - $37,449 = 15% $37,450 - $90,749 = 25% $90,750 - $189,299 = 28% $183,300 - $411,499 = 33% $411,500 - $413,199 = 35% $413,200 - ----------- =39.6%

10. Highest Marginal Tax Rates

11. Tax Policy and the Great Depression  A huge personal income tax increase was adopted in 1932 in the midst of the Great Depression.  The top marginal rate was increased from 25 percent to 63 percent in 1932. Other tax rates were increased by a similar proportion.  The results were disastrous. In 1932, real output fell by 13 percent, the largest single- year decline during the Great Depression era. Unemployment rose from 15.9 percent in 1931 to 23.6 percent in 1932.  In 1936, the Roosevelt Administration increased the top marginal rate to 79 percent. Recession and rising unemployment also followed this tax increase.

12. Important Lesson  It is not a good idea to increase tax rates during a recession.

13. A famous economic concept…

14. THE LAFFER CURVE EXPLAINED  https://www.youtube.com/watch?feature=player_detail page&v=FqLjyA0hL1s https://www.youtube.com/watch?feature=player_detail page&v=FqLjyA0hL1s

15. The Laffer Curve

16. Low Taxes = Economic Growth

17. Source #7 Free Trade A nation progresses by selling goods and services that it can produce at a relatively low cost and buying those that would be costly to produce.

18. How Do We Satisfy Our Wants and Needs?  We can be economically Self- Sufficient, or  We can specialize and trade with others leading to Economic Interdependence

19. Are we Self-Sufficient or Interdependent?  If every article of clothing you are wearing was made in the USA then I’ll give you $20!

20. What was the most important document written in 1776?

21. What made The Wealth of Nations “THE” most important document written in 1776? Adam Smith wrote about a pin factory. What did they call the workers in the pin factory? Just a bunch of pinheads.

22. THE WEALTH OF NATIONS  Smith observed that if each worker had to make their own pin they could maybe produce 20 in a day.  Through specialization the production stage was broken into 18 distinct operations.  Through specialization, the total output in the factory was 48,000 pins per day.

23. I am going to prove that specialization works. I am going to name a state and you tell me what that state specializes in: IdahoPotatoes FloridaOranges Texas Oil or cattle MichiganAutomobiles Nevada Any illegal activity that you can think of

24. Absolute Advantage When a country is able to produce more of a given product than another country Adam Smith

25. Absolute Advantage Countries should specialize in and export those things in which they have an absolute advantage and should import those things which their trading partners have an absolute advantage in Adam Smith

26. Comparative Advantage A country’s ability to produce a given product relatively more efficiently than another country; that is – production at a lower opportunity cost David Ricardo

27. Comparative Advantage  Mutually beneficial trade is always possible between nations whose pre- trade relative costs and prices differ.  Really?  What if one country is better at making everything?

28. Comparative vs Absolute Advantage  https://www.youtube.com/watch?v=cqGRIqFDo2w&feat ure=player_detailpage 28

29. Comparative Advantage  https://www.youtube.com/watch?feature=player_detail page&v=ol4NexZ0iII https://www.youtube.com/watch?feature=player_detail page&v=ol4NexZ0iII 29

30. Comparative Advantage Illustrated  https://www.youtube.com/watch?feature=player_detail page&v=FpTBjRf8lGs 30

31. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 Which country has the Absolute Advantage in the production of Maple Syrup? In Copper Wire?

32. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 More importantly, which country has the Comparative Advantage in Maple Syrup? In Copper Wire? And Why?

33. Opportunity Costs U.S. Canada Maple Syrup 5/6 C 8/7 C Copper Wire 6/5 MS 7/8 MS If you spend time making maple syrup you give up the opportunity to make copper wire and vice versa

34. Opportunity Costs U.S. Canada Maple Syrup 5/6 C 8/7 C Copper Wire 6/5 MS 7/8 MS Which country has the Comparative Advantage in Maple Syrup? In Copper Wire? Why?

35. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 1 1 + 11 + 15 U.S. 2 2 x = 10 Canada 22 x=14 U.S. saves one-man hour Canada saves one-man hour