Understanding Taxes and Government Spending: A Comprehensive Overview

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Chapter 14
 
Taxes and Government Spending
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Section 1
 
Chapter 14
 
Taxation
 is the primary way that the government
collects money
Without 
revenue
, or income from taxes, government
would not be able to provide goods and services
 
What are taxes?
 
The constitution gives Congress the power to tax
The 16
th
 amendment gives Congress the power to levy
an income tax
 
Taxes and the Government
 
Taxes must be for “the common defense and general
welfare”
Federal taxes must be the same in each state
Government cannot tax exports
 
Limits on the Power to Tax
 
A 
tax base
 is the income, property, good or service
that is subjected to a tax
Proportional taxes 
are a tax for which the percentage
of income paid in taxes remains the same for all
income levels
 
Tax Bases and Tax Structures
 
Progressive Taxes
 are taxes for which the percent of
income taxed increases as income increases
Regressive Taxes
 are taxes for which the percentage
of income taxed decreases as income increases
 
Tax Bases and Tax Structures
 
1) Simple- easy to understand
2) Economy- Government should be able to collect
taxes without spending too much time or money
3) Certainty- Should know when the tax is due
4) Equity- Should be fair
 
Characteristics of a Good Tax
 
Incidence of a tax 
examines who bears the final
burden of a tax
If a good is inelastic, the consumer will bear the
burden of the tax. If a good is elastic, the seller will
bear the burden of the tax.
 
Who bears the burden of the tax?
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Section 2
 
Chapter 14
 
Federal Income taxes are collected throughout the
year as you earn income
Withholding
 is the process by which employers take
tax payments from you before your receive your
paycheck
The federal income tax is progressive
 
Individual Income Taxes
 
A tax return is a form where you declare your income
to the government
A taxable income is a person’s total income minus
exemptions and deductions
 
Filing a Tax Return
 
Filing a Tax Return
 
Exemptions are set
amounts that you
subtract from your
income (spouse, kids)
 
Deductions are variable
amounts that you can
subtract from your
income (school supplies
for students)
 
Corporations must pay  a federal tax on their income
This is a progressive tax i.e.          Profit =           taxes
 
Corporate Income Taxes
 
Social Security Tax
- Funded by Federal Insurance
Contributions Act (FICA). Go to those of old age,
survivors and disability insurance.
Medicare Taxes
- Funded by FICA. Health insurance for
those over 65 and some with disabilities.
Unemployment Taxes
- Collected by both the federal
and state government. You can collect
unemployment if you were laid off or are actively
seeking work
 
Social Security, Medicare and
Unemployment Taxes
 
Excise Tax
- a tax on a production of a good (ex.
Cigarettes)
Estate Tax
- a tax on the total value of money and
property of a person that has died. Paid before
inheritors receive their share
Gift Tax
- a tax on the money or property one living
person gives to another
Import tax
- taxes on imported good are called 
tariffs
 
Other Types of Taxes
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Section 3
 
Chapter 14
 
Mandatory spending
 is money that lawmakers 
must
spend on certain programs or to use for interest
payments on the national debt
 
Mandatory and Discretionary
Spending
 
 
Discretionary spending allows lawmakers to spend
money wherever they like
 
Mandatory and Discretionary
Spending
 
 
Defense spending- counts for about half of the
federal government’s discretionary spending
 
-includes military salaries, military equipment and
 
operating costs of military bases
 
Discretionary Spending
 
An 
entitlement program
 is a social welfare program
that people are “entitled” to if they meet certain
requirements (Social Security, Medicare)
Medicaid
- benefits low-income families, some people
with disabilities and elderly people in nursing homes.
 
Entitlements
undefined
 
Section 4
 
Chapter 14
 
A state’s 
operating budget
 pays for everyday
expenses such as salaries, supplies and maintenance
of state facilities.
A state’s 
capital budget
 pays for investment
spending.
 
State Budgets
 
Education
- Help finance public state universities and
some aid to local governments for K-12.
Public Safety
- State police systems and prisons
Highways and Transportation
- States build and
maintain highways. Also pay some costs of waterways
and airports
 
Where are State Taxes Spent?
 
Public Welfare
- Support some public hospitals and
clinics. Help pay for and administer federal benefits
programs
Arts and Recreation
- State parks, some museums and
historical sites
Administration
- Help keep the state running
(Congressman)
 
Where are State Taxes Spent?
 
Limits to State Taxation
 
-Since trade and commerce are considered
 
national enterprises, states 
cannot
 tax imports
 
or exports. They also cannot tax goods sent
 
between states.
 
State Tax Revenues
 
Sales tax
- sales taxes are the main source of revenue
for many states
Other state taxes include state income tax, excise tax
and property tax
 
State Tax Revenues
 
Local government help assist with public school
systems, fire protection, public transportation, record
keeping (birth/death certificates) and law
enforcement
 
Local Government Spending and
Revenues
 
Property taxes are the main source of local revenue
Local governments can collect their own excise, sales
or income tax
Some taxes, such as room and occupancy rates, are
aimed at nonresidents in order for local governments
to earn extra money
 
Local Government Spending and
Revenues
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This comprehensive overview delves into the fundamental concepts of taxes and government spending. It covers topics such as the definition of taxes, the power of Congress to tax, limits on taxation, tax structures, characteristics of a good tax, and the burden of taxes. Exploring these concepts provides insight into how governments collect revenue to provide goods and services.


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  1. Chapter 14 Taxes and Government Spending

  2. Chapter 14 Section 1

  3. What are taxes? Taxation is the primary way that the government collects money Without revenue, or income from taxes, government would not be able to provide goods and services

  4. Taxes and the Government The constitution gives Congress the power to tax The 16thamendment gives Congress the power to levy an income tax

  5. Limits on the Power to Tax Taxes must be for the common defense and general welfare Federal taxes must be the same in each state Government cannot tax exports

  6. Tax Bases and Tax Structures A tax base is the income, property, good or service that is subjected to a tax Proportional taxes are a tax for which the percentage of income paid in taxes remains the same for all income levels

  7. Tax Bases and Tax Structures Progressive Taxes are taxes for which the percent of income taxed increases as income increases Regressive Taxes are taxes for which the percentage of income taxed decreases as income increases

  8. Characteristics of a Good Tax 1) Simple- easy to understand 2) Economy- Government should be able to collect taxes without spending too much time or money 3) Certainty- Should know when the tax is due 4) Equity- Should be fair

  9. Who bears the burden of the tax? Incidence of a tax examines who bears the final burden of a tax If a good is inelastic, the consumer will bear the burden of the tax. If a good is elastic, the seller will bear the burden of the tax.

  10. Chapter 14 Section 2

  11. Individual Income Taxes Federal Income taxes are collected throughout the year as you earn income Withholding is the process by which employers take tax payments from you before your receive your paycheck The federal income tax is progressive

  12. Filing a Tax Return A tax return is a form where you declare your income to the government A taxable income is a person s total income minus exemptions and deductions

  13. Filing a Tax Return Exemptions are set amounts that you subtract from your income (spouse, kids) Deductions are variable amounts that you can subtract from your income (school supplies for students)

  14. Corporate Income Taxes Corporations must pay a federal tax on their income This is a progressive tax i.e. Profit = taxes

  15. Social Security, Medicare and Unemployment Taxes Social Security Tax- Funded by Federal Insurance Contributions Act (FICA). Go to those of old age, survivors and disability insurance. Medicare Taxes- Funded by FICA. Health insurance for those over 65 and some with disabilities. Unemployment Taxes- Collected by both the federal and state government. You can collect unemployment if you were laid off or are actively seeking work

  16. Other Types of Taxes Excise Tax- a tax on a production of a good (ex. Cigarettes) Estate Tax- a tax on the total value of money and property of a person that has died. Paid before inheritors receive their share Gift Tax- a tax on the money or property one living person gives to another Import tax- taxes on imported good are called tariffs

  17. Chapter 14 Section 3

  18. Mandatory and Discretionary Spending Mandatory spending is money that lawmakers must spend on certain programs or to use for interest payments on the national debt

  19. Mandatory and Discretionary Spending Discretionary spending allows lawmakers to spend money wherever they like

  20. Discretionary Spending Defense spending- counts for about half of the federal government s discretionary spending -includes military salaries, military equipment and operating costs of military bases

  21. Entitlements An entitlement program is a social welfare program that people are entitled to if they meet certain requirements (Social Security, Medicare) Medicaid- benefits low-income families, some people with disabilities and elderly people in nursing homes.

  22. Chapter 14 Section 4

  23. State Budgets A state s operating budget pays for everyday expenses such as salaries, supplies and maintenance of state facilities. A state s capital budget pays for investment spending.

  24. Where are State Taxes Spent? Education- Help finance public state universities and some aid to local governments for K-12. Public Safety- State police systems and prisons Highways and Transportation- States build and maintain highways. Also pay some costs of waterways and airports

  25. Where are State Taxes Spent? Public Welfare- Support some public hospitals and clinics. Help pay for and administer federal benefits programs Arts and Recreation- State parks, some museums and historical sites Administration- Help keep the state running (Congressman)

  26. State Tax Revenues Limits to State Taxation -Since trade and commerce are considered national enterprises, states cannot tax imports or exports. They also cannot tax goods sent between states.

  27. State Tax Revenues Sales tax- sales taxes are the main source of revenue for many states Other state taxes include state income tax, excise tax and property tax

  28. Local Government Spending and Revenues Local government help assist with public school systems, fire protection, public transportation, record keeping (birth/death certificates) and law enforcement

  29. Local Government Spending and Revenues Property taxes are the main source of local revenue Local governments can collect their own excise, sales or income tax Some taxes, such as room and occupancy rates, are aimed at nonresidents in order for local governments to earn extra money

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