Taxes and Spending

1. Taxes and Spending Chapter 14

2. What are Taxes? Chapter 14, Section 1

3. What are Taxes? • Taxes are required to pay for local, state, and federal programs • The income received from taxes is known as revenue • The government has the power to tax under the Constitution • Certain powers go to states and local governments • Certain powers go to federal government • All must be for the common defense and general welfare of the country

4. Tax Base • The tax base is the income that is subject to tax. • Income tax • Sales tax • Property tax • Corporate income tax

5. Tax Structure • Proportional Tax…% of income…flat tax • Progressive Tax…% increases with increasing income • Federal Income tax • Regressive Tax…places a higher burden on those with less income • Sales tax

6. What Makes a Good Tax? • Simplicity…laws are simple and easy to understand • Efficiency…collect taxes without spending too much time or money • Certainty…know what is due and when • Equity…fair so there is not a heavier burden • Fairness • Benefit received approach • Those receiving the benefits pay the tax (gas) • Ability to pay principle • People pay according to their ability to

7. Bearing the Burden • Whoever pays the tax, bears the burden of the tax • The producer can easily shift the burden of the tax to the consumer • Easier to shift it if the demand is inelastic! • The final burden (amount) is known as the incidence of a tax

8. Federal Taxes Chapter 14, Section 2

9. Federal Taxes • Individual Income Taxes • 48% of federal revenue • Withheld from income (withholdings) • Tax returns are filed to balance your payment or refund • Exemptions and deductions...reduce your taxable income • Tax brackets...determine % you will pay • Income tax is a progressive tax

11. Federal Income Tax Rates, 2017 SOURCE: https://taxfoundation.org/2017-tax-brackets//

12. Federal Taxes • Corporate Income Tax • 11% of revenue • FICA...social security, Medicare, unemployment • 33% • Other Taxes • Excise...taxes on certain goods (gas, tobacco) • Estate Taxes...tax on the estate of someone who has died • Gift Taxes...taxes on gifts above $10,000 • Import Taxes/Tariffs...tax on imports • Tax incentives...used to encourage or discourage behavior

14. Review 1. The taxes taken out of an employee’s wages before he or she receives them are called (a) tax return. (b) social security. (c) FICA. (d) withholdings. 2. How is the federal income tax a progressive tax? (a) The higher the income a person has, the higher the percentage that person pays as tax. (b) A person with a higher income pays more money in taxes, although the percentage he or she pays as tax is less. (c) Two married people who file their taxes together will pay more taxes than a single person will. (d) Children pay no taxes, regardless of whether they earn a large income.

15. Federal Spending Chapter 14, Section 3

16. Federal Spending • The government uses tax revenue to fund the operations of the country • Mandatory vs. Discretionary spending • Mandatory...programs that need to be funded by law (interest on national debt and entitlement programs) • Entitlement programs are those that people are entitled to and meet the requirements of...social security, Medicare etc... • Discretionary spending...programs that can be adjusted • Defense, education, environment etc...

17. Federal Spending • Much of the revenue collected by the federal government through taxation is also distributed to state and local governments

20. Review 1. All of the following are examples of mandatory spending except (a) defense spending. (b) Medicare. (c) Social Security. (d) Medicaid. 2. An entitlement program is (a) a program to provide benefits paid to everyone. (b) a program to provide benefits paid to government employees only. (c) a program to provide benefits to people who meet certain requirements. (d) a program to provide benefits to illegal aliens.

21. State and Local Taxes and Spending Chapter 14, Section 4

22. State Taxation • Like the federal government, state governments collect taxes to pay for their operating costs • States have strict tax laws and are required to balance their budgets • Operating budget...pays for operation of state • Capital budget...pays for upgrades and investments

23. State Spending • Education • Law enforcement • Transportation • Public welfare • Recreation

24. http://www.usgovernmentspending.com/US_state_spending_pie_charthttp://www.usgovernmentspending.com/US_state_spending_pie_chart

25. Sources of Income for States • Sales Tax • State income taxes • Business Taxes • Fees and licenses

26. NEW YORK STATE https://openbudget.ny.gov/overview.html

27. Local Government Spending • Like the state government, local governments need to tax to cover operating costs • Schools • Fire • Law • Transportation • Elections • Recreation

28. ONEIDA COUNTY – SPENDING - FY 2016

29. Local Government Revenue • Property Taxes...major source • Other local taxes (sales tax, bed taxes, rental taxes etc...)

30. Property Taxes http://www.usgovernmentrevenue.com/US_state_revenue_pie_chart http://www.usgovernmentspending.com/US_local_spending_pie_chart

31. ONEIDA COUNTY – REVENUE - FY 2016

32. WHITESBORO CSD - FY 2017 - 2018

35. Review 1. For most state governments, the main source of revenue is a (a) room tax. (b) property tax. (c) general excise tax. (d) statewide sales tax. 2. The main source of revenue for local governments is (a) a property tax. (b) an excise tax. (c) a sales tax. (d) an income tax.