How a Bill How a Bill Becomes a LawBecomes a Law

Play “The making of a Law”- 20 minutes

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TaxesTaxes

“What we pay for civilized society”Oliver Wendell Holmes

Power to TaxPower to Tax

Expressed constitutional limitationsExpressed constitutional limitations Taxes may be levied only for public Taxes may be levied only for public

purposespurposes Export taxes are prohibitedExport taxes are prohibited Direct taxes must be equally Direct taxes must be equally

apportioned among the states according apportioned among the states according to their populationsto their populations

Indirect taxes must be levied at the Indirect taxes must be levied at the same rate throughout the country.same rate throughout the country.

Power to TaxPower to Tax

Implied limitation on the power to tax Implied limitation on the power to tax State and local governmentsState and local governments The Federal Government The Federal Government

may not tax State or local governments in the may not tax State or local governments in the exercise of their governmental dutiesexercise of their governmental duties

Federal can’t tax State’s for revenue made throughFederal can’t tax State’s for revenue made through Vehicle registrationVehicle registration Property taxes Property taxes

may tax nongovernmental State and local may tax nongovernmental State and local activitiesactivities

tax on State-sold liquortax on State-sold liquor

Progressive TaxesProgressive Taxes Progressive- tax levied according to Progressive- tax levied according to

level of incomelevel of income Income taxes- tax levied on the Income taxes- tax levied on the

individuals salary or wages (income)individuals salary or wages (income) Income Tax brackets in U.S.Income Tax brackets in U.S.

$0 - 7,550$0 - 7,550 10%10% $7,550 - 30,650$7,550 - 30,650 15%15% $30,650 - 74,200$30,650 - 74,200 25%25% $74,200 - 154,800$74,200 - 154,800 28%28% $154,800 - 336,550$154,800 - 336,550 33%33% $Above 336,550$Above 336,550 35%35%

Bush tax cuts Bush tax cuts

Regressive TaxesRegressive Taxes

Regressive- tax levied at a flat rateRegressive- tax levied at a flat rate Social security- 6.2% on earnings up to $94,200Social security- 6.2% on earnings up to $94,200

A person who makes $30,000 a year pays $1,860 A person who makes $30,000 a year pays $1,860 (30,000*.062) in tax or 6.2% of wages(30,000*.062) in tax or 6.2% of wages

b. A person who makes $200,000 a year pays $6,045 b. A person who makes $200,000 a year pays $6,045 (97,500*.062) in tax or 3% of wages(97,500*.062) in tax or 3% of wages

c. A person who makes $500,000 a year still pays c. A person who makes $500,000 a year still pays $6,045 in tax (97,500*.062) or 1.2% of wages$6,045 in tax (97,500*.062) or 1.2% of wages

Lower incomes families hit harderLower incomes families hit harder

Federal BudgetFederal Budget

How is the federal budget How is the federal budget created?created?

““No money shall be drawn from the No money shall be drawn from the treasury, but in consequence of treasury, but in consequence of appropriations made by law” Article appropriations made by law” Article I sec. 9I sec. 9

Two Types of spendingTwo Types of spending

Controllable spending Controllable spending (Discretionary)(Discretionary) Congress and the President decide how Congress and the President decide how

much will be spent each year much will be spent each year Appropriations- assigning to particular Appropriations- assigning to particular

useuse Military equipmentMilitary equipment Environmental protection Environmental protection

Uncontrollable SpendingUncontrollable Spending Uncontrollable spending- 80% of Uncontrollable spending- 80% of

spendingspending Mandatory uncontrollable spendingMandatory uncontrollable spending

Interest on public debtInterest on public debt Entitlements- Benefits that must be paid to Entitlements- Benefits that must be paid to

all those who meet the eligibility all those who meet the eligibility requirementsrequirements

Social securitySocial security MedicareMedicare MedicaidMedicaid Food stampsFood stamps Unemployment insuranceUnemployment insurance