1. TAXES Ch. 16 Sec. 1

2. “[I]n this world, nothing is certain but death and taxes.” -Benjamin Franklin Power to tax comes directly from the Constitution. –A–Art. 1, Sec. 8, Clause 1 Limitations on the power to tax: 1)Must be levied only for public purpose 2)Congress cannot tax exported goods 3)Direct taxes must be equally apportioned among the States EXCEPTION: Income Taxes (16 th Amendment) 4)All indirect taxes must be set at the same rate throughout the country

3. DIRECT TAXES: –Must be paid by the person upon whom it is levied (i.e. income tax) INDIRECT TAXES: –Is not borne by the person(s) upon whom it is levied (i.e. sales tax)

4. Types of Federal Taxes 1)INCOME TAX: -Flexible: can be changed to serve various needs. -Progressive: the more money you/your company makes, the more you pay... Title: The New Man on the Job Artist: Clubb, John Scott Date: 1913

5. Types of Federal Taxes cont. 1)INCOME TAX cont.: A)Individual Income Tax -Produces the largest amount of federal revenue. -Taxes are levied on each person’s taxable income. NOTE: Some deductions from income are allowed for items such as: medical care, home mortgages and charitable contributions. I shall never use profanity except in discussing house rent and taxes. -Mark Twain

6. Types of Federal Taxes cont. 1)INCOME TAX cont.: B)Corporation Income Tax - A tax that a corporation must pay on its net income. - Non-profit organizations (churches, charitable organizations) are not subject to the corporation income tax. You don't pay taxes - they take taxes. -Chris Rock

7. Types of Federal Taxes cont. 2)SOCIAL INSURANCE TAX 1)Social Security A)Old-Age B)Survivors C)Disability Insurance 2)Medicare A)Health care for the elderly 3)Unemployment Compensation

8. Types of Federal Taxes cont. 3)EXCISE TAX: A)Tax on manufacture, sale or consumption of goods (telephone services, airline tickets, etc.) HIDDEN TAXES!! 4)ESTATE & GIFT TAXES: A) Estate Tax: tax on assets of one who dies. B) Gift Tax: tax on a gift by a living person. 5)CUSTOMS DUTIES: A)Taxes on goods brought into the United States (tariffs, import duties). Includes coffee, bananas and some tourist purchases.

9. Non-Revenue Raising Taxes -Used to regulate/influence behavior (i.e. licensing requirements for prescription drugs, hunting, etc.)