1. Wednesday December 3, 2014 Mr. Goblirsch – Economics
OBJECTIVE – Students Will Be Able To – SWBAT:
- Identify the different types of taxes.
AGENDA:
WARM-UP: Tax Burden
ASSESSMENT: MacroEcon Quiz (30 MC Questions)
WHEN YOU FINISH: Calculate your Stocks for DOW Week 7
CONCEPT: Taxes
VIDEO: Calculating Federal Income Taxes (7 min)
GUIDED PRACTICE: Filing a Tax Return
*****MacroEcon Quiz TODAY – Ch 10, 12, 13, 16*****
Tax Burden WARM-UP: (Follow the directions below)
***5 minutes***
Analyze the graph on P Answer the questions below.
Define the term incidence of tax (P. 363)
Which graph shows elastic demand, and which graph shows inelastic demand? (Refer to P. 92 if needed)
On which graph did the price of the product increase the most because of the new tax? Who bears the burden of a price increase?
On which graph did the quantity decrease the most? Who bears the burden based on this graph?

2. Fiscal Policy – Taxes Part II
Chapter 14

3. PRIOR KNOWLEDGE: Taxes and the Constitution
Taxation is the primary way that the government collects money.
Limits on the Power to Tax
The power to tax is also limited through the Constitution:
1. The purpose of the tax must be for “the common defense and general welfare.”
2. Federal taxes must be the same in every state.
3. The government may not tax exports.
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.

4. Two Ideas About “Fairness”
#1 – Benefits-Received Principle
The benefit principle states that those who benefit from government goods and services should pay in proportion to the amount of benefits they receive. 
The limitations of this principle are that many government services provide the greatest benefit to those who can least afford them and that benefits are hard to measure.

5. Two Ideas About “Fairness”
#2 – Ability-To-Pay
The ability-to-pay principle is the belief that people should be taxed according to their ability to pay, regardless of the benefits they receive. 
The ability-to-pay principle is based on two ideas: that societies cannot always measure the benefits derived from government spending, and that people with higher incomes suffer less discomfort in paying taxes than people with lower incomes.

6. CONCEPT: Tax Bases and Tax Structures
A tax base is the income, property, good, or service that is subject to a tax.
Proportional Taxes
A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels.
Progressive Taxes
A progressive tax is a tax for which the percent of income paid in taxes increases as income increases.
Regressive Taxes
A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases.

7. Types of Taxes
Figure 9.3

8. Structured Academic Discussion
What benefits does the government enjoy in having a progressive income tax?
Which form of tax do you feel is the most equitable (fair)? Justify your answer.

9. CONCEPT: Filing a Tax Return
A tax return is a form on which you declare your income to the government and determine your taxable income.
Taxable income is a person’s total (or gross) income minus exemptions and deductions.
Deductions are variable amounts that you can subtract from your gross income.
Exemptions are set amounts that you subtract from your gross income for yourself, your spouse, and any dependents.
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

10. CONCEPT: Individual Income Taxes
“Pay-as-You-Earn” Taxation
Federal income taxes are collected throughout the course of the year as individuals earn income.
Tax Withholding
Withholding is the process by which employers take tax payments out of an employee’s pay before he or she receives it.
Tax Brackets
The federal income tax is a progressive tax. There are currently 7 tax brackets.

11. U.S. FEDERAL INCOME TAX RATES
Single Taxable Income
Married Filing Jointly
Married Filing Separately Taxable Income
Head of Household Taxable Income
10%
$0 – $8,925
$0 – $17,850
$0 – $12,750
15%
$8,926 – $36,250
$17,851 – $72,500
$12,751 – $48,600
25%
$36,251 – $87,850
$72,501 – $146,400
$36,251 – $73,200
$48,601 – $125,450
28%
$87,851 – $183,250
$146,401 – $223,050
$73,201 – $111,525
$125,451 – $203,150
33%
$183,251 – $398,350
$223,051 – $398,350
$111,526 – $199,175
$203,151 – $398,350
35%
$398,351 – $400,000
$398,351 – $450,000
$199,176 – $225,000
$398,351 – $425,000
39.6%
$400,001+
$450,001+
$225,001+
$425,001+
WATCH: Calculating Federal Taxes Video (YouTube – Khan Academy)