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Published byCaren McCarthy Modified over 9 years ago
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Raising Revenue AKA Fiscal Policies The federal government can’t develop and sustain its programs without revenue –The income the government collects from us.
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How does the Federal government make revenue? Taxes –Charges laid on individuals and businesses by a government. THIS IS THE FEDERAL GOVERNMENTS PRIMARY SOURCE OF REVENUE!!
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Federal Taxes How does the federal government collect taxes from an individual? –Income taxes!!
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Individual Income Tax Makes up the federal government’s largest source of revenue. –Around 70% of all federal revenue comes from personal income tax. –What does this include? Wages and salaries Business profits Tips Dividends –Payments received as a return on an investment
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Individual Income Tax, cont. Personal income tax is based on a progressive tax –Larger percentages of income are taken from people with higher incomes. Table 1 [Income Tax Paid to Federal Government] Individual Tax Payer 10% on income between $0 and $8,025 15% on the income between $8,025 and $32,550 25% on the income between $32,550 and $78,850 28% on the income between $78,850 and $164,550 33% on the income between $164,550 and $357,700 35% on the income over $357,700
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What is taxable income? Taxable income = sum of all sources of a person’s income minus deductions and exemptions Math Equation: –All Personal Income – (Deductions + Exemptions) = Taxable Income
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What are deductions and exemptions? Deductions: –Money that the government allows you to subtract from your taxable income. School loan interest Mortgage interest Donations Exemptions: –Money that can not be taxed at all. Given to people who have children.
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So how does this all add up? Personal Income –$40,000 Deductions –$3,000 mortgage interest –$650 school loan interest –$750 donations Total = $4,400 deductions Exemptions –$3,500 for one child Total taxable income = $32,100 –WHY IS THIS IMPORTANT???
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You get a refund!! Original Personal Income –$40,000 Taxed at 25% –Should have paid $10,000 in taxes! True taxable income –$32,100 Taxed at 15% –Only have to pay $4,815 in taxes. Refund = $5,185 Table 1 [Income Tax Paid to Federal Government] Individual Tax Payer 10% on income between $0 and $8,025 15% on the income between $8,025 and $32,550 25% on the income between $32,550 and $78,850 28% on the income between $78,850 and $164,550 33% on the income between $164,550 and $357,700 35% on the income over $357,700
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Trip to Bahamas
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Or Cavs floor seats Season Tickets
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Or rent your own castle for a day!
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When do you have to pay your taxes? April 15 th of every year! –If you do not pay by then, you have to: File for an extension Pay fines Go to jail!
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What if I own a business? If you own a business, –You must pay a corporate income tax. Based on a business’s net income. –What is net income? Revenue (Money made) – Expenses (Money spent). Makes up the 3 rd largest source of revenue for the federal government. Example: –Apple Computers paid $1,580,000,000 in 2008
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How much did Apple make in 2008? $6,210,000,000 in revenue!
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