1. Represent two different views on taxes that are still shared today.

2. Which is the fairest tax?
-Everyone pays the same percentage
-Those with higher incomes pay a higher percentage
-Those with lower incomes pay a higher percentage.
Which is the fairest tax?
Take the survey
& discuss your answers.

3. Essential Questions -____do governments redistribute income?
Chapter 12 Taxes & Taxation
-____do governments redistribute income?
-____ do governments redistribute income?
-____do regressive, progressive, and proportional taxes affect redistribution of income?
Essential Questions

4. Governments redistribute income ___________________________________________________________________________.
Governments redistribute income_____________________________________________________________________.
Regressive, progressive, and proportional taxes decide the amount of taxes an individual must pay.
The Main Ideas

5. What do other countries do for taxes?
“Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, Andorra and the United Arab Emirates (UAE).” Investopedia.com

7. Why Do We Pay Taxes? So that the governments can…
Pay for goods the general public uses
Pay for services the general public uses

8. Progressive, Regressive, and Proportional Taxes
Progressive Tax:____________________________________________.
Income of $20,000 pays 15%, vs. income of $100,000 pays 25%
Regressive Tax:_______________________________________________.
You can more easily afford to pay sales taxes with a higher income
Proportional Tax: _____________________________________________.
Everyone pays 10% at all income levels
Proportional taxes are taxes that stay the same regardless of a person's or business's income. For example, some sales taxes are considered proportional because a tax rate of 8% in a certain state would apply to all customers in that state and take the same fraction of their incomes. Regressive taxes also refer to uniform rates for everyone. These rates are considered regressive because low-income taxpayers are more affected by the rate than those with a higher incomes. This is because the tax takes a larger percentage of their incomes. Someone who earns $400 per week and pays 10% tax on groceries costing $200 would pay $20, or 5% of their income, in taxes. In the same scenario, a person earning $800 per week would only spend 2.5% in taxes
Read more: What is the difference between a regressive tax and proportional tax? | Investopedia
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10. What does the government do with that money
What does the government do with that money? Which taxes pay for which goods and services?
In other words, which taxes go to federal, state, or local public goods and services?

11. Federal vs. State/Local Taxes
FEDERAL INFORMATION
______________________________
Income taxes
Payroll taxes
Social security taxes
Medicare taxes
Unemployment taxes
Military defense
Highways and roads
Other gov’t programs
STATE/LOCAL INFORMATION
________________________________
Sales taxes
Income & Property taxes
Grants from Fed. gov’t
Education
Public Welfare
Roads and repairs
Public Safety
Police and Fire

12. Types of Taxes - ________________
Are charged both federally and by the State
Rates are much different
Federal Income Rate is much higher than State
Tax your earned and unearned income
Unearned Income includes received monies
Inheritance, some retirement payments, etc.
Charged against individuals and corporations
_______________________________________________________
Federal rates get higher as income increases

13. Types of Taxes – __________________
These are the “other” things taken from your paycheck each time
FICA – Federal Insurance Contributions Act
Also known as ________________________________
Created to make sure people were “secure” when they were no longer in the workforce (1935)
Followed the financial issues of the 20’s
___________________________________________
_____________________________________________
Additional tax to help alleviate medical costs to government when people are unable to pay bills themselves
______________________________________________

14. Types of Taxes – Transaction and Property Taxes
__________________________________
Percentage charged upon the purchase of certain items
___________________________________________________________
_____________________________________________
Percentage charged on the value of land owned
__________________________________________
______________________________________________
Percentage charged on all large personal items
Examples: Cars, Boats, Trucks, RVs, etc.

15. Possible Additional Taxes
________________________________________________________________
Registration fees
Licensure fees
Additional sales tax fees
Gas taxes or transportation taxes
Additional taxes on cigarettes and alcohol
Goal is to make them too expensive for people to buy
____________________________________________________________

16. Redo the survey from before

17. http://www. investopedia

18. Warm Up on your ½ sheet
1. How much money you want to be earning (per year) when you are What percentage do you think that income has to pay to the government in taxes (in the US).

19. In reality…
US Federal Tax Rates: (only 3 % of Americans make over $250,000)
Add % more depending on which state you work in
3. On your ½ sheet how much in tax would you would pay?

20. Net Income Gross income: How much you earn
Net income: how much you keep
Net income = gross income - gross income*tax rate
For example: Mr. Klein made $37,500 last year.
Net income = $37,500 - $37,500(.25)
Net income = $37,500 - $9,375 = $28,125
4. How much is your “net income”?

21. Income Tax in USA IRS – tax collection agency in USA
IRS manual – 70,000 pages (4 X size of the Bible)
Taxes are deducted throughout year
Every citizen must file every year by:
If you paid more during the year then you need to: you get a refund
If you paid less during the year then you need to: pay the difference

22. Taxes: For Example For example: Mr. Klein made $37,500 last year.
Net income = $37,500 - $37,500(.25)
Net income = $37,500 - $9,375 = $28,125
If Mr. Klein paid $10,375 in 2010, what happens after he files?
Why is a BIG refund not such a great idea?

23. What are “Good Taxes”? According to Adam Smith: Simple to understand
Avoid negative incentives
Avoid loopholes

24. Loopholes Tax incentives Really, ways to not pay tax “write offs”
Thousands of examples:

25. What Are Tax Deductions & Credits?
Tax Deduction – reduction of your taxable income
Lowers the overall amount (base) you will be charged a tax on
Examples: local taxes paid, student loans, charitable contributions, home mortgage interest
These are deducted b/c they were already paid to a gov’t agency or charity
Tax Credit – reduces the actual tax
Government encourages public to purchase specific products for the benefit to the general public
Example: Hybrid cars, energy efficient windows/appliances
Helps in reducing other bills for government long term

26. How Do You Know What to Pay?