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Taxation

Taxation. Taxation. Ec/Entrepreneurship. Descriptive Overview:. Students will describe the most common types of taxes levied by the government. Students will also be expected to identify specific taxes that fall into the major tax types. Descriptive Overview:. Students will:

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Taxation

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  1. Taxation

  2. Taxation Ec/Entrepreneurship

  3. Descriptive Overview: • Students will describe the most common types of taxes levied by the government. • Students will also be expected to identify specific taxes that fall into the major tax types

  4. Descriptive Overview: Students will: • identify specific tax types that fall into major tax types • explain the purpose of taxes

  5. Key Questions • How does the government acquire money to operate on a federal, state and local level? • What are the 3 major types of taxes? How are they different? • Why is the government allowed to collect taxes?

  6. Terminology/Vocabulary • regressive tax • progressive tax • proportional tax

  7. Regressive Taxes • Defined as a tax that takes a larger share from higher incomes. • Regressive taxes do not follow the ability to pay principal. That is, people who make more money should pay more taxes. • Sales tax is an example of a regressive tax. Some consumers may pay a higher percentage of tax compared to individuals that earn more money. • Social Security tax is another example of a regressive tax. Residents that make less money will pay a higher percentage of their income toward Social Security. • Regressive tax based on percentage of income is higher in lower income individuals.

  8. Progressive Taxes • Progressive taxes are based on the ability to pay principal. • Taxpayers at higher income levels pay larger proportions of their incomes in taxes than people at lower levels. • Federal income tax is based on a progressive tax. • The more money individuals make the more money they are asked to pay in taxes.

  9. Proportional Taxes • A proportional tax is one that imposes the same percentage rate of taxation on everyone’s income. • Based on the thought, the higher the value, the greater the tax bill. • An example would be a school tax of 2.5% for all residents. • Proportional taxes do follow the ability to pay principal.

  10. Percent of Income Worksheet • .In 1957, what percentage of income was paid in federal and state taxes? • .In 1997, what percentage of income was paid in federal and state taxes? • .Why do you think that percentage of taxes that individuals must pay have increased? • .Why would taxes increase during a time of war? • .Do you think income tax is fair? Why or why not? • .What is another method of obtaining funds that governments can use instead of levying taxes?

  11. Types of Taxes • Direct tax-a tax paid by the person against whom the tax is levied • Indirect tax-a tax that can be shifted to a party other than one on whom the tax is levied • Sales tax-a tax on goods that are bought and sold • Excise tax- a sales tax levied only on specific items

  12. The Purpose of Taxes • Taxes raise money to finance government programs and services. • Taxes regulate or restrict certain types of business practices, products or services. • Income, sales, estate and gift and property taxes are revenue taxes. • Excise taxes and import duties are regulatory taxes. • Taxes raise money to finance government programs and services. • Taxes regulate or restrict certain types of business practices, products or services. • Income, sales, estate and gift and property taxes are revenue taxes. • Excise taxes and import duties are regulatory taxes.

  13. Ability-to-pay principal The ability-to-pay principal states that taxes should be paid by citizens who can most afford them. This should be regardless of any benefits they receive. Economists argue that although taxes may not enable some high-income groups certain luxuries, taxation hinders lower income individuals from gaining necessities.

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