Bellwork 12/14/15 Define the last few words on your vocabulary sheet. They can be found in Ch.9 Taxes You have 10 minutes….

Taxes “In this world, nothing is certain but death and taxes”

-Benjamin Franklin

School House Rockhttps://www.youtube.com/watch?v=6Q3NPgHZzDo

What are Taxes? Taxes are payments people are required to pay to local,

state and national governments.

Taxes are used to pay for services provided by government:

Schools Police Defense Etc.

Which groups in society should bear a bigger burden of the tax load, and which groups should bear less?

• Types of taxes affect people differently, depending on their income.

• 3 forms of taxes are: Proportional Tax Progressive Tax Regressive Tax

Proportional Taxes

Imposes the same tax rate on all levels of income (same for wealthy and poor)

Everyone is treated equally

Ex: A Sales Tax can be considered a type of Proportional Tax since all consumers are required to pay the same

Argument Against…. The poor need their income

more than the wealthy. They need every penny and

cannot afford as much of a tax as the wealthy

Argument For…. Everyone is equal- pay same

% of income.

Proportional Tax

Progressive TaxesThe more money you make, the more you will be taxed.

A tax that imposes a higher percentage rate of taxation on higher incomes than lower ones.

Affects the wealthy more than the lower class

Ex. Income Tax with Tax Brackets

Progressive Tax• Argument for: the wealthy can afford a higher tax and should

pay more of the tax burden.

• Argument against: Why should the hardest working and most successful pay more taxes? – Wealthy are penalized for their success.

Progressive Tax Example A person making $20,000 pays 10% income tax ($2000). Their after

tax income is $18,000.

A person making $200,000 pays 30% tax ($60,000). Their after tax income is $140,000.

Regressive TaxesA tax that imposes a higher percentage rate of taxation on lower incomes

A tax that is applied uniformly, hits the lower income individuals harder

Ex: sales tax

Regressive Tax Argument for: Tax levied on what is bought.

If you cannot afford the tax, do not buy the item. Argument against: Tax harms those who can least afford it.

Example:

Two people buy a $20,000 car. They both pay $1600 in sales tax. The first person makes $30,000. The sales tax is 5.3% of his income. He has

$28,400 left after paying the tax. The second person makes $100,000. The sales tax is 1.6% of his income. He

has $98,000 left after paying the tax.

Direct vs. Indirect Tax Structures A direct tax is a tax that is imposed or collected on a specific group of

people or organizations. An example of this would be income tax.

Indirect tax is a tax that is just collected and is the same for everyone. And example of this would be sales taxes, goods and service tax.

Federal Government Revenue Sources The three main sources of federal tax revenue

are individual income taxes, payroll taxes, and corporate income taxes.

Some other sources of tax revenue include excise taxes, FICA, social security, and estate taxes.

Did you know that 46% of all federal revenue comes from individual income taxes?!

Income Tax An income tax is a tax that is placed on the taxpayer based on their

income/profits. The income tax is determined by applying a tax rate which will increase based

on income increase.

IRS Announces 2015 Tax Brackets

Tax BracketsThe federal income tax is a progressive tax.

Federal Income Taxes “Pay-as-You-Earn” Taxation

Federal income taxes are collected throughout the course of the year as individuals earn income

Tax Withholding The process by which employers

take tax payments out of an employees pay before he or she receives it.

Federal Income Taxes Tax Returns:

At the end of the year, an employer gives employees a report showing how much they withheld in taxes.

Individuals file a tax return with information regarding exemptions and deductions that adjust the amount of tax that should have been paid.

If you paid too much, you get a refund. If you paid too little, you must pay the balance.

All tax returns must be filed by April 15th.

FICA

The second most important federal revenue source is the FICA.

“Federal Insurance Contributions Act Tax”

Levied on employers and employees equally to pay for Social Security and Medicare

Social Security

A tax that has been placed on employers and employees used to fund the social security program.

Normally collected as a payroll tax or a self-employment tax.

Social security tax pays for all retirement and disability benefits that many Americans receive.

Provides funds for older Americans, their survivors, and disability insurance.

Program funded by the Federal Insurance Contributions Act (FICA).

Corporate

Corporate tax is a tax placed on the total income of a corporation.

These taxes can vary from 15% to 39%

Some corporate transactions are not taxable. These include most formations and some types of mergers, acquisitions, and liquidations.

Estate and Gift

Estate tax is the tax on the transfer of property when a person dies.

• Includes everything a person owned

• Only taken on estates over $1.5 million.

• Opponents labeled it as the “Death Tax” because they believe it is unfair to wealthy, successful people.

• Can range from 18-50 percent of value of estate

Gift tax is a tax on the transfer of money or wealth and is paid by the person who makes the gift

Used to make sure that wealthy people do not try to avoid taxes by giving away their estates before they die

Estate Taxes

ExciseExcise tax is a tax paid when purchases are made on certain goods.

This taxed is placed on most manufactured goods such as clothes.

The tax percentage can vary based on your state.

Often used to discourage use of the item, called a “Luxury” or “Sin” tax.

Ex. Cigarettes, Alcohol, Gas, Telephone

State and Local Government Revenue Sources

Local taxes are taxes that are due in addition to state and federal taxes.

These can be in the form of property, sales, water, sewer, school, and occasionally, income taxes.

Funds generated help cover community services such as public school related expenses.

State Taxes Sales Tax: Taxes on goods sold within the state. Not levied on food. Excise Tax: “Sin Tax” on sale of certain items ex. cigarettes, alcohol,

and gasoline. State Income Taxes Corporate Income Taxes: Taxes on corporations in the state

State Spending Education: Florida colleges, funding to public schools Public Safety: State police, prisons Highways and transportation Public Welfare: Hospitals, unemployment Arts and Recreation: Parks, museums, historic sites State employees

Florida’s Taxes

Sales Taxes

State Sales Tax: 6% (food, prescription and nonprescription drugs are exempt)

Personal Income Taxes

No state income tax

Property Taxes

All property is taxable at 100% of it's just valuation. Every person who owns and resides on real property in Florida on January 1 and makes the property their permanent residence is eligible to receive a homestead exemption up to $50,000.

Florida’s Taxes

Estate Tax

Florida does not have an estate or inheritance tax.

Corporate Income Tax

The Florida Corporate Income Tax is 5.5%

Sole proprietorships, individuals, estates of decedents, and testamentary trust are exempted and do not have to file a return.

Intangibles Tax

Florida no longer has a tax on intangible good such as investments. The law that required this was repealed in 2007.

Local Spending Public Schools Law enforcement/Fire Protection Local Parks/Recreation Public Health (hospitals, sewers, food inspectors) Public Transportation Social Services (food stamps, welfare, etc.) Records (Birth/Death certificates, marriage licenses)

29%

13%

19%

3%2%

3%1%3%

6%

10%

8%

3%

Parks and Rec.

Education

Public Welfare

Hospitals

Health

Corrections

Natural Resources

Govt. admin.

Interest on debt

Highways

Inurance

Other