Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax."

Name: Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax."
Uploaded: 2017-08-27T18:34:20+00:00
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Description: Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax."

Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax." -- attributed to Albert Einstein "Death and taxes may be certain, but we don't have to die every year." – Unknown "People who complain about taxes can be divided into two classes: men and women." – Unknown

Chapter 14 – Taxes and Government Spending Section 1 – What are Taxes?
Tax – a required payment to a local, state, or national government Income, sales, property, capital gains, etc. Revenue – income received by the government from tax collection Tax Base – income, property, good or service that is subject to a tax

Tax Structures Proportional Tax – % of income taxes remains the same for all income levels (Flat tax) Progressive Tax – % of income paid in taxes increases as income increases (Federal Income Tax) Regressive Tax - % of income paid in taxes decreases as income increases (Sales Tax)

Characteristics of a Good Tax
Simplicity – easy to understand, keep records, prepare tax forms, anticipate amount of taxes Efficiency – easy to collect, taxpayers should not pay too much or take too much time to pay Certainty – clear due dates, amount to be paid, how to pay Equity – fair, so not one person bears too much or too little of the tax burden

Individual Income Taxes
“Pay-As-You-Earn” Taxation – taxes are paid based on annual income; individuals pay income taxes throughout the year Tax Withholding – tax payments taken out of employees pay before they receive it; ensures annual payment Tax Return – form used to file income taxes; declare income and taxable income $934.00

Individual Income Taxes
Taxable Income – A person’s gross income minus exemptions and deductions Personal Exemptions – set amounts that you subtract from your gross income 0, 1, 2, 3, 4, 5, 6, etc. Deductions – amounts you can subtract, or deduct from your gross income. Interest on a home, children, charity, religious, education, etc. Tax Bracket – scheduled rate at which you are taxed based on your annual income

Corporate Income Taxes
FICA (Federal Insurance Contributions Act) – funds Social Security and Medicare. Social Security – funds people of old-age, survivors and disabilities, established in 1935, originally to provide old-age pensions of workers Medicare – national health insurance program that helps pay for people over age of 65 or with certain disabilities Medicaid – national health insurance for people within the poverty threshold Unemployment – insurance for workers laid off through no fault of their own

Other Types of Taxes Excise tax – tax on gasoline, cigarettes, alcohol, phone service, cable, internet, etc. Estate tax – “death tax”, tax on estate or value of money and property of a person who has died Gift tax – tax on money or property that one living person gives to another; a person can give up to $10,000 a year tax-free per individual Tariff – import tax on foreign goods brought into the country

Stossel Taxes

Budget Out of the 3.5 Trillion dollars of U.S. federal budget, break down in percentages the amount that you think should go towards the following areas of the economy: Category Percentage Allocated Dollars Social Security 19.63 $ 695 billion National Defense 18.74 $ 664 billion Unemployment/ Welfare 16.13 $ 571 billion Medicare 12.79 $ 453 billion Medicaid 8.19 $ 290 billion Interest on Debt 4.63 $164 billion Education 1.32 $ 46.7 billion Other 18.0 $ 635 billion

Fiscal Policy and The Federal Budget
Fiscal Policy – the use of government spending and revenue collection to influence the economy Expansionary Fiscal Policy – involves increased government spending to stimulate the economy during or in anticipation of a business-cycle contraction Contractionary Fiscal Policy - a decrease in government spending to slow the economy down during an inflationary economy Federal budget – a written document indicating the amount of money the government expects to receive and how they will spend it Released the first Monday in February each year Fiscal year – 12 month period, October 1 – September 30

Creating The Federal Budget
Step 1 – Federal agencies request money; spending proposals are sent to the Office of Management and Budget (OMB) Step 2 – The OMB works with the President to create a budget, President presents to Congress Step 3 – Congress makes changes to the budget and sends the amended budget to the President Step 4 – The President signs the budget into law Step 1 → Step 2 → Step → Step 4

Federal Spending Mandatory Spending – programs that lawmakers are required by existing laws to spend money on (Social Security, Medicare, Medicaid, etc.) Discretionary Spending – spending that government can adjust; increase or decrease (Defense, environment, scientific research, etc.)

Budget Deficits and the National Debt

Budget Deficits and the National Debt
Balanced budget – money going into the U.S. Treasury is the same amount of money going out Revenue = Spending The last balanced budget occurred in 1997 under President Bill Clinton

Balancing the Budget Budget Surplus – occurs when the government takes in more than it spends Revenue > Spending Budget Deficit – occurs when the government spends more than it takes in Revenue < Spending

Dealing with a Budget Deficit
Create money – the government can print or inject money into economy Borrow money – government borrows money by selling bonds Bond is a type of loan with a promise to repay with interest Bonds sold domestically or globally China owns 1 trillion dollars in U.S. bonds

The National Debt National debt – the total amount of money the federal government owes overall to bondholders Combination of all borrowing over time Budget deficit – the amount of money the government owes to bondholders in one fiscal year

Mandatory and Discretionary Spending Chart pgs. 371-373
Mandatory Spending Description Entitlements Social Security Medicare Medicaid Other Mandatory Spending Programs Social welfare programs that people are “entitled to” if they meet certain eligibility requirements. The largest category of federal spending. More than 50 million retired or disabled people and their families and survivors receive monthly benefits. Serves around 40 million people, most over 65 years old. Pays for hospital care and the costs of physicians and medical services. A program that benefits low-income families, disabled and elderly people in nursing homes. Largest source of funds for medical and health related services for people within the poverty threshold. Food stamps, supplemental security income and child nutrition, retirement benefits and insurance for federal workers, veterans pensions and unemployment. Discretionary Spending Description Defense Spending Other Spending Pays the salaries of people in the army, navy, air force, marines and civilian employees. Largest portion of discretionary spending. Education, training, scientific research, student loans, technology, national parks and monuments, law enforcement, environmental cleanup, housing.

Expansionary and Contractionary Fiscal Policies, pgs. 389-390
Word Definition Description Expansionary Fiscal Policies Purpose Increase in government spending Cutting Taxes Contractionary Fiscal Policies Decrease in government spending Increasing Taxes

Model of aggregate demand & aggregate supply
Model used to explain short-run fluctuations in economic activity around its long- run trend Aggregate - sum of all supply and demand in an economy Two variables: Economy’s output of goods and services Average level of prices (CPI or GDP Deflator) Price Level (CPI/GDP Deflator) Aggregate supply (AS) Aggregate demand (AD) Equilibrium price level Equilibrium output Quantity of Output (GDP)

Aggregate Demand Aggregate-demand curve
Sum of C+I+G+NX (real GDP) at each price level Downward sloping Low price levels increase the quantity of goods and services, vice versa Price Level (CPI/GDP Deflator) Aggregate demand (AD) Quantity of Output (GDP)

Why the AD Curve Might Shift?
Shifts arising from changes in consumption Decreases in spending – people become more concerned with saving and paying off debt because of a recession Increases in spending – people’s fear of a recession ends; consumption increases Shifts arising from changes in investment Change in firm investing – tax policy, pessimism about economy in future, interest rates Shifts arising from changes in government purchases Congress increases/decreases spending Shift arising from changes in net exports Global recessions would cause a decrease in demand for U.S. products

What Shifts the Aggregate Demand Curve?
Price Level A B C Quantity of Output Situation Change in AD New AD Curve Congress cuts taxes Business spending decreases Government spending increases; no new taxes Survey shows consumer confidence jumps Stock collapses; investors lose billions President cuts defense spending by 20%; no increase in domestic spending C A C C A A

The Aggregate Supply Curve
AS curve – total quantity of goods and services firms can produce and sell at any given price level Aggregate-supply curve is upward sloping What shifts the curve? Temporary changes in Land, Labor, Capital

What Shifts the Aggregate Supply Curve?
Price Level A B C Quantity of Output Situation Change in AS New AD Curve Unions grow more aggressive; wage rates increase OPEC successfully increases oil prices Labor productivity increases dramatically Giant natural gas discovery decreases energy prices Computer technology brings new efficiency Research shows that improved schools have increased the skills of American workers A A C C C C

Aggregate Demand or Supply?
Scenario AD or AS 1. A factory 2. A printing press 3. A woman buys a hamburger for her child 4. A U.S. company sells a jet to a foreign country 5. A company builds a new factory Trees 7. A corn field 8. A coal mine 9. Students purchase tickets for a football game 10. Two newlyweds buy a house AS AS AD AD AD AS AS AS AD AD

Difference between Monetary and Fiscal Policy
Monetary Policy Fiscal Policy Agency Structure Focus Expansionary Policy Contractionary Policy Head Official Federal Reserve Federal Government 1 Central Bank, 12 Districts President and Congress Money Supply and Banking Federal Budget OMOs, RRR, Discount Rate (Interest Rates) Government Spending, Taxation Tools for Policymaking Buy bonds, lower RRR and DR Spend more, tax less Sell bonds, raise RRR and DR Spend less, tax more Barack Obama Ben Bernanke

AD AS Scenarios A significant increase in world oil prices
Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS1 AS AD Pe1 Y1 Pe Y Quantity of Output

Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS AD1 AD Pe1 Y1 Pe Y Quantity of Output

Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS1 AS AD Pe1 Y1 Pe Y Quantity of Output

Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS AD AD1 Pe Y Pe1 Y1 Quantity of Output

Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS AS1 AD Pe Y Pe1 Y1 Quantity of Output

Government announces a large increase in spending on health and education Average wage rises way above inflation for the third month running Exchange rate appreciation knocks export hopes for manufacturing US productivity levels at their highest level for 10 years A booming stock market leads to highest rate of retail sales in a century Price Level AS AD1 AD Pe1 Y1 Pe Y Quantity of Output

Tools of Fiscal Policy Chart
Expansionary/ Contractionary Explanation 1. The government cuts business and personal income taxes and increases its own spending. 2. The government increases the personal income, Social Security and corporate income tax. 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses.

Expansionary/ Contractionary Explanation 1. The government cuts business and personal income taxes and increases its own spending. Expansionary Decreased taxes increase C & I. Increase in government spending increases G. Shifts AD to the right. 2. The government increases the personal income, Social Security and corporate income tax. 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses.

Expansionary/ Contractionary Explanation 1. The government cuts business and personal income taxes and increases its own spending. Expansionary Decreased taxes increase C & I. Increase in government spending increases G. Shifts AD to the right. 2. The government increases the personal income, Social Security and corporate income tax. Contractionary I & C decrease because of the tax increase. Shifts AD to the left. 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses.

Expansionary/ Contractionary Explanation 1. The government cuts business and personal income taxes and increases its own spending. Expansionary Decreased taxes increase C & I. Increase in government spending increases G. Shifts AD to the right. 2. The government increases the personal income, Social Security and corporate income tax. Contractionary I & C decrease because of the tax increase. Shifts AD to the left. 3. Government spending goes up while taxes remain the same. Higher government spending without a corresponding rise in tax receipts increases G. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses.

Expansionary/ Contractionary Explanation 1. The government cuts business and personal income taxes and increases its own spending. Expansionary Decreased taxes increase C & I. Increase in government spending increases G. Shifts AD to the right. 2. The government increases the personal income, Social Security and corporate income tax. Contractionary I & C decrease because of the tax increase. Shifts AD to the left. 3. Government spending goes up while taxes remain the same. Higher government spending without a corresponding rise in tax receipts increases G. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses. Reduction in government spending results in a decrease in AD. Increases in taxes reduces C + I.

Effects of Fiscal Policy Chart
Scenario Expansionary/ Contractionary Effect on Federal Budget Objective for Aggregate Demand Action on Taxes Action on Gov’t Spending Effect on the National Debt 1. National unemployment rate rises to 12% 2. Inflation is strong at a rate of 14% per year. 3. Surveys show consumers are losing confidence in the economy, retail sales are weak and business inventories are increasing rapidly 4. Business sales and investment are expanding rapidly, and economists think strong inflation lies ahead. 5. The government eliminates the deductibility of interest expense for tax purposes Move toward a deficit Expansionary Move toward a surplus Contractionary Move toward a deficit Expansionary Move toward a surplus Contractionary Move toward a surplus Contractionary

Chapter 15 Practice Worksheet
1. If a country’s central bank were to engage in activist stabilization policy, in which direction should it move the money supply in response to the following events? A wave of optimism boosts business investment and household consumption causing price levels to increase. Decrease the money supply To balance its budget, the government raises taxes and reduces expenditures causing a slowdown in the economy. Increase the money supply OPEC raises the price of crude oil causing people’s disposable income to reduce. The taste for the country’s products amongst the residents of other countries declines. The stock market falls.

2. In which direction should the Federal Reserve move interest rates in response to the following events? A wave of optimism boosts business investment and household consumption causing price levels to increase. Increase interest rates To balance its budget, the government raises taxes and reduces expenditures causing a slowdown in the economy. Decrease interest rates OPEC raises the price of crude oil causing people’s disposable income to reduce. The taste for the country’s products amongst the residents of other countries declines. The stock market falls.

3. If policy makers were to use fiscal policy to actively stabilize the economy, in which direction should they move government spending and taxes? A wave of optimism boosts business investment and household consumption causing price levels to increase. Decrease spending, increase taxes To balance its budget, the government raises taxes and reduces expenditures causing a slowdown in the economy. Increase spending, decrease taxes OPEC raises the price of crude oil causing people’s disposable income to reduce. The taste for the country’s products amongst the residents of other countries declines. The stock market falls.

Daily Assignment Questions State and Local Taxes and Spending, pgs
What does a states operating budget pay for? List examples. What does a state’s capital budget pay for? List examples How do the state budgets differ from the federal government? Where are taxes spent? List and describe each of the following: Education Public Safety Highways and Transportation Public Welfare Arts and Recreation Administration

Flow Chart Types of Taxes, pgs. 365-369
Individual Income Taxes Corporate Income Taxes Social Security, Medicare and Unemployment Taxes Other Types of Taxes 1. Pay-As-You-Earn Taxation 2. Tax Withholding 3. Tax Return 4. Taxable Income 5. Personal Exemptions 6. Deductions 7. Tax Brackets 1. Impact on Federal Budget 2. Deductions 3. Progressive structure of Corporate taxes 1. FICA 2. Social Security 3. Medicare 4. Unemployment Taxes 1. Excise Taxes 2. Estate Taxes 3. Gift Taxes 4. Import Taxes (Tariffs) 5. Tax Incentive

Consumers Expect a Recession Fall in AD – Prices fall, real GDP falls
Foreign Income Rises Rise in AD – Prices rise, real GDP rises Foreign price levels fall Fall in AD – Prices fall, real GDP falls Workers Expect Future Inflation, Negotiate Higher Wages Now Fall in AS – Prices rise, real GDP falls Technological Improvements Increase Productivity Rise in AS – Prices fall, real GDP rises Government Spending Increases Rise in AD – Prices rise, real GDP rises

Extra Credit Around what amount is the national debt?
What is the difference between monetary and fiscal policy? What type of monetary and fiscal policy has been evident in our U.S. economy over the past few years? MM = 1/RRR

Binder Check Due Today 4-25
Banking Simulation OMOs Simulation SQ3R, pgs RRR and the Money Multiplier The Fed Webquest Chapter 10 Practice Chapter 10 and 16 Study Guide Chapter 10 and 16 CW Puzzle Ch Study Guide Ch CW Puzzle Chapter 15 Practice Worksheet Daily Tens Essential Questions Notes (10, 16, 14, 15) Vocab Terms

Essential Questions What is the difference between monetary and fiscal policy? What is the difference between the national debt and a budget deficit? Monetary policy deals with decisions made by the ________, while fiscal policy deals with decisions made by the ______________________ Fed the federal government. one year A budget deficit is earning less than you spend for ________, while national debt reflects ____________________________ all borrowing throughout U.S. history.

Daily Assignment Questions – Ch. 14 Section 1 pgs. 359 – 360
*Answer in complete sentences* How did taxes affect early American colonists? What gives the government the right to tax U.S. citizens? What is the purpose of taxation? What are some things that are provided by the government through revenue? Where is the power to tax found in the Constitution? What are the two limitations of taxes found in the taxation clause? What is Congress unable to tax? What is a tax base? List the items that could be included in the tax base.

Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax."

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Tax Quotes Benjamin Franklin said, "The only things certain in life are death and taxes." "The hardest thing in the world to understand is the income tax."

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