1. Today’s Schedule – 11/15 Defining Taxes PPT Tax Forms Tax Goals Research HW – Read 14.2

2. Basic Definitions Tax: A required payment to local, state or national government – Needed so that government can operate Revenue: Income received from taxes

3. Taxes According to the Constitution Power to tax is given to Congress in Article I Limitations – Tax must be for common defense and general welfare – Taxes cannot be for individual – Federal taxes must be the same in each state – Cannot tax churches/exports

4. Types of Taxes Income, property, G or S that is subject to a tax Income: Tax on earnings Sales: Tax on G or S sold Property: Tax on the value of property Corporate: Tax on company’s profits

5. Tax Structures Proportional: Percentage of taxes paid is the same for all income levels Progressive: As income increases, percentage of taxes paid increases (decreases as income decreases) – Federal income tax is an example of this Regressive: Percentage of tax decreases as income increases – Sales tax is an example of this

6. Characteristics of Good Taxes Simplicity- Easily understood Efficiency- Easy to collect and pay Certainty- Clearly understood when tax is due and how much is due Equity- Fair to everyone

7. Equity Benefits Received Principle- one should pay the amount of taxes equal to the benefits s/he receives Ability to Pay Principle