1. Topic 7: Government Revenue & Spending

2. Lesson Title: Government Revenue
Warm-Up:
What do you believe to be the major sources of government revenue?
Why does the government require revenue?

3. What are Taxes?
Required payment to local, state, or national government
Primary way the government collects money

4. The Power to Tax Congress has the power to tax
Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax.
The Sixteenth Amendment gives Congress the power to levy an income tax.

5. Revenue
Income received by a government from taxes & other non tax sources
Helps government provide goods & services

6. Origins of Government Revenue

7. Limits on Taxes
Purpose must be for the “common defense & general welfare”
Federal taxes must be the same in every state
State taxes can and do vary

8. Types of Taxes Proportional Taxes
Taxes that remain the same regardless of income.
Example:
Property taxes are an example of this. 2% property tax if you make $20,000 or $200,000.

9. Types of Taxes Progressive Taxes
Taxes that increase as income increases.
Example:
Income taxes are progressive taxes; the more you earn, the more you pay.

10. Types of Taxes Regressive Taxes
Taxes that decrease in proportion to income. Has a greater burden on lower income-earners than higher-income earners.
Example:
Sales Tax: Paying a seven percent tax on a cup of coffee hurts me more than in hurts Bill Gates.

12. Sources of Government Revenue
Individual & corporate income taxes
Social insurance taxes
Excise taxes
Estate & gift taxes
Taxes on imports

13. Taxes
Taxes are often used by the government to change people’s behavior.
Raise on cigarettes to stop people from smoking.
Lower taxes on business to stimulate economic activity.
Give homeowners a tax cut to encourage homeownership.
Cut capital gains taxes to encourage investments. Certain tax deductions encourage energy conservation
Windows, Insulation, Hybrid Cars, etc.

14. Taxable Income
Person’s gross (or total) income minus exemptions & deductions
Includes salaries, wages, tips, and commissions
Includes income from investments
Unemployment
Alimony
Other (self-employment, rent)

15. Non-taxable Income Child support Gifts Veterans benefits
Social Security

16. Misc. Definitions
Personal Exemptions: Set amounts that you subtract from your gross income for yourself, your spouse, and any dependents
Deductions: variable amounts that you can subtract, or deduct, from your gross income
Ex. Interest on mortgage, donations to charity, state & local tax payments

17. Other Sources of Government Revenue
Social Security Tax
Taxes to FICA that go to the Social Security Administration to fund old age, survivors, & disability insurance
Medicare
National health insurance program that helps pay for health care for people over the age of 65
Property Taxes/Estate Taxes
Tax on total value of the money & property of a person who has died
Excise Taxes
Tax on the sale & manufacture of a good
Gift Taxes
Tax on money or property that one living person gives another

18. The Flow of Taxes
Money is collected from people and businesses then redistributed in the areas where the government sees need.

19. Your Pay Check 20 200.00 Hours Earnings TOTAL Description Amount
HOURS AND EARNINGS
Hours
Earnings
TAXES AND DEDUCTIONS
Description
Amount 20
200.00
FICA
Federal
State
City
Total Taxes
15.20
10.25
5.10
1.00
31.55
TOTAL
Taxable Wages
Less Taxes
Net Pay
168.45

20. Where do my taxes go?
(Taxes 5:10)

21. Activity: Filing a Tax Return

22. Spending-Federal, State, & Local Governments

23. Federal Spending Two Main Categories:
How does the government make money and what does it get spent on?
Two Main Categories:
Mandatory Spending-Spending on certain programs that is mandated, or required by existing law, (transportation, agriculture, energy, social security, etc.)
Discretionary Spending- Spending category about which government planners can make choices, (Defense, education, training, student loans, environment, technology, etc.)

24. Entitlement Programs (Sub-Category of Mandatory Spending)
Social welfare program that people are “entitled to” of they meet certain eligibility requirements.
Examples: Social Security, Medicare (Over 65 years), Medicaid (low income families)

25. State Tax Revenue How does the state make money?
Income taxes, corporate income tax, sales tax, and excise tax
Examples: education, public safety, highways & transportation, public welfare, recreation, administration (State workers)

26. Local Government Revenue
How does the local government make money?
Property taxes, school taxes, other local taxes like village taxes
What are local taxes spent on?
Public schools, roads, libraries, jails, salaries (teachers and administrators)

27. Activity: You Spend the Money

28. Additional Slides

29. Activity: Taxes Placemat Activity
Directions: Complete the graphic organizer by reading each article and using your knowledge of government revenue and spending.