1. Taxes

2. Principles of Taxation – all tax payers are treated equal – not all pay the same amount! 1) Ability to pay Principle – if you make more you pay more (example: federal taxes) 1) Ability to pay Principle – if you make more you pay more (example: federal taxes) 2) Benefit Principle – those who use it should pay the tax 2) Benefit Principle – those who use it should pay the tax (example: toll roads) 3) Regressive Tax – the less you make, the more it impacts you (example: sales tax) 3) Regressive Tax – the less you make, the more it impacts you (example: sales tax) 4) Proportional Tax – everyone pays 2% of your income 4) Proportional Tax – everyone pays 2% of your income (example: state tax)

3. Two ways to be taxed Direct Taxes – paid to government Direct Taxes – paid to government (income tax) Indirect Tax – when tax is included in cost of item Indirect Tax – when tax is included in cost of item

4. Sales Tax – tax on goods & services – all but 5 states pay sales tax (no sales tax DE, NH) (no sales tax DE, NH) PA & MD are 6%, NJ is 7%, NY is 4% *Tax is added to the price of goods and services at the time of purchase. *Funds collected are divided between State and Local Governments

5. Excise Tax (also called Luxury Tax) *additional tax (on top of sales tax) on specific goods and services. – cigarettes ($1.60/pack) – gasoline (about 33¢ per gallon) – alcohol – air-travel (about 15%) – firearms *Included in the price charged for the item

6. Real Estate (Property) Tax – Based on the value of land and buildings *Government workers estimate the value of land/structure and the tax is a % of that value. – This revenue goes to schools, local, and state government – This revenue goes to schools, local, and state government

7. Estate Tax – tax on assets *house *possessions like jewelry and $ *life insurance left to beneficiaries (over $1 million)

8. Gift Tax – you can get $13,000 per year tax free gift (cash or value of item) pay tax over that amount on the gift

9. Business/License Tax – pay a tax when you get your Doctor’s license or open a business Business/License Tax – pay a tax when you get your Doctor’s license or open a business Tariffs – tax on imports Tariffs – tax on imports

10. Self Employed people have to pay their own taxes. They pay quarterly. They may have to ESTIMATE their profits each quarter to pay taxes. Failure to pay or underpay may result in fines/penalties. They also have to pay both parts of the 7.65% to FICA – they pay 15.3% Self Employed people have to pay their own taxes. They pay quarterly. They may have to ESTIMATE their profits each quarter to pay taxes. Failure to pay or underpay may result in fines/penalties. They also have to pay both parts of the 7.65% to FICA – they pay 15.3%