Taxes & Government Spending by S44y04

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									Taxes & Government
Spending

   Chapter 14 Section 2
   Federal Taxes
Taxes & Government Spending

   Objectives:
       Describe the process of paying individual income
          taxes.
       Explain the basic characteristics of corporate
          income taxes.
       Understand the purpose of Social Security,
          Medicare, and unemployment taxes.
       Identify other types of taxes.
Taxes & Government Spending

   During the fiscal year 2007, the federal
        government took in more $ 2.568 trillion in
        taxes. {Population: 301,139,947}
   If you divide up this federal tax revenue
        among all people in the United States, it
        comes to about $ 8,528.00/person.
   The Federal Government has six major
        sources of tax revenue.
Taxes & Government Spending

1. Individual Income Tax:
     43% of the government’s revenues come from
        payment of individual income taxes {2007}.
     The amount a person owes is determined on an
        annual basis.
     In theory, the federal government could wait until
        the end of tax year to collect individual income
        taxes.
     In reality, that would be a problem for both
        taxpayers and the government.
Taxes & Government Spending

   What percentage of money comes from
    Individual Income Taxes?
Taxes & Government Spending

   43%
Taxes & Government Spending

    The government has to pay their bills like
       everyone else and they need money throughout
       the year.
    Many people in the country would have a hard
       time paying their taxes all at once.
    For these reason, the federal income tax system
       is collected in a “pay-as-you-earn” system.
    Individuals pay throughout the year.
    Tax Withholding – taking payments out of your
       pay before you receive it.
Taxes & Government Spending

   What is meant by tax withholding?
Taxes & Government Spending

   Taking payments out of your check before
    you receive it.
Taxes & Government Spending

    The amount withheld is an estimate of your
       annual income.
    Filing a Tax Return
        Due Date APRIL 15TH of each year.
        Taxable Income - a person’s gross (total income)
              minus exemptions and deductions.
        Personal Exemptions – set amounts that you subtract
              from your gross income for yourself, your spouse,
              and any dependents.
        Deductions – are variable amounts that you can
              subtract, or deduct, from your gross income.
Taxes & Government Spending

   What is the date that you have to have paid
    your taxes from the previous year?
Taxes & Government Spending

   April 15th
Taxes & Government Spending

     What is a person’s gross (total income)
      minus exemptions and deductions?
Taxes & Government Spending

   Taxable Income
Taxes & Government Spending

   What is the set amounts that you subtract
    from your gross income for yourself, your
    spouse, and any dependents?
Taxes & Government Spending

   Personal Exemptions
Taxes & Government Spending

   What are variable amounts that you can
    subtract, or deduct, from your gross income?
Taxes & Government Spending

   Deductions
Taxes & Government Spending

    Tax Brackets
        The federal income tax is a progressive tax.
        The tax rate rises with the amount of taxable income.
Taxes & Government Spending

  2007 Federal Income Tax Rates – Schedule X
     This is for those filing as a single person.
   $      0 - $ 7,825 -------------- 10%
   $   7,825 - $ 31, 850------------- 15%
   $ 31,850 - $ 77,100-------------      25%
   $ 77,100 - $ 160,850-------------- 28%

   $ 160,850 - $ 297,350-------------- 36%

   $ 297,350 and over ---------------- 39.6%
Taxes & Government Spending

   If you make $ 35,600.00 per year, how much
    tax will you pay? (percentage)
Taxes & Government Spending

   25%
Taxes & Government Spending

   Corporate Income Taxes
       Corporations also pay taxes on their taxable
         income.
       Corporation taxes make up about 13% of the
         federal revenue {2007}.
       The problem in determining a corporation’s
         taxable income is the many deductions that
         they can claim.
       They can subtract their many expenses from their
         income before the taxation applies.
Taxes & Government Spending

   How much of the total revenue that the
    Federal Government collects comes from
    Corporate Taxes?
Taxes & Government Spending

   13%
Taxes & Government Spending

   The companies can deduct the cost of their employee
        health insurance.
      2007 Corporate Federal Income Tax Rates
    $      0 - $ 50,000-------------------        15%
    $ 50,000 - $ 75,000-------------------        25%
    $ 75,000 - $ 100,000-------------------       34%
    $ 100,000 - $ 335,000------------------       39%
    $ 335,000 - $ 10 million----------------      34%
    $ 10 million - $ 15 million----------------   35%
    $ 15 million - $ 18.3 million--------------   38%
    $ 18.3 million and up ---------------------   35%
Taxes & Government Spending

   Social Security, Medicare, and
    Unemployment Taxes
        Employers withhold money for another category of taxes
              authorized under the Federal Insurance
              Contributions Act (FICA).
            FICA taxes fund two large government programs, Social
                Security, and Medicare.
            Employees and employers share FICA payments.
Taxes & Government Spending

   What two government programs does the
    FICA tax fund?
Taxes & Government Spending

   Social Security and Medicare
Taxes & Government Spending

    Social Security Taxes
        Most of the FICA taxes go to the Social Security
                Administration.
        This funds programs like…
            Old-age
            Survivors
            Disability Insurance (OASDI)
        Social Security started out as a retirement fund
        In 2000, the most you could pay into Social Security as
                a tax was $ 76,200
Taxes & Government Spending

   What federal agency administers the FICA
    tax money?
Taxes & Government Spending

   Social Security
Taxes & Government Spending

   Medicare Taxes
       FICA Taxes also fund Medicare.
       Medicare program is a national health insurance program
           that helps pay for health insurance for people over the
           age of 65.
       It also covers people with certain disabilities.
       There is no ceiling on this tax.
   Unemployment Taxes
       This tax is paid by the employer
       It pays for an insurance policy for workers that are laid off
           from work.
Taxes & Government Spending

   What is Medicare?
Taxes & Government Spending

   It is a national health insurance program that
    helps pay for health insurance for people
    over the age of 65.
Taxes & Government Spending

   Other Taxes
       Excise Taxes – a general revenue tax sale or
         manufacture of a good.
       Federal excise taxes apply to gasoline, cigarettes,
         alcoholic beverages, telephone services, cable
         services, and others.
Taxes & Government Spending

   What is an excise tax?
Taxes & Government Spending

    It is a general revenue tax sale or
     manufacture of a good.
Taxes & Government Spending

    Estate Taxes – a tax on the estate, or total value
       of the money and property, of a person who has
       died. {As of 2007}
    $       0 - $ 2,200       15%
    $ 2,200 - $ 5,150         25%
    $ 5,150 - $ 7,850         28%
    $ 7,850 - $ 10,700        33%
    $ 10,700 and above        35%
Taxes & Government Spending

    Gift Taxes – a tax on money or property that one
      living person gives to another.

               Not over $ 2,150    ------   15%
               $ 2,150 - $ 5,000   ------   25%
               $ 5,000 - $ 7,650   ------   28%
               $ 7,650 - $10,450   ------   33%
               $10,450 and over    ------   35%
Taxes & Government Spending

    Import Taxes – Also called tariffs.
    Taxes on imported goods into our country.
    May have special arrangements with another
       country.
    This causes the price of foreign goods to rise.
Taxes & Government Spending

   What is another name for an Import Tax?
Taxes & Government Spending

   Tariff
Taxes & Government Spending

    Taxes that affect behavior
        The use of taxation to encourage or discourage behavior
               is called Tax Incentive.
        Taxes on products like alcohol and tobacco are
               designed to reduce consumption by the American
               people.
        Most of the time it does not work.
        Gasoline Tax (Federal only) is 38.4% in Texas – you
               have to add the other state and highway taxes to
               that figure to get the true tax on a gallon of
               gasoline.
Taxes & Government Spending

   What term describes the use of taxation to
    encourage or discourage behavior?
Taxes & Government Spending

     Tax Incentive

								
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