Hey, did you hear the one Hey, did you hear the one about…………about…………

What are the 2 things in life you can What are the 2 things in life you can always count on ???always count on ???

Death …….Death …….

………….aaaand……..aaaand…….

Taxes

“I’m taxes.”

How are taxes How are taxes structured?structured?3 types of tax structures:3 types of tax structures: 1. proportional 1. proportional – – the percentage of income the percentage of income paid in taxes remains the same for all paid in taxes remains the same for all income levels -- “flat tax”income levels -- “flat tax”

2. progressive2. progressive – – the percentage of income paidthe percentage of income paid in taxes increases as income increasesin taxes increases as income increases -- example – Federal income tax-- example – Federal income tax

Progressive tax structure – Federal income tax

3. Regressive 3. Regressive

- the percentage of income paid - the percentage of income paid

in taxes decreases as income in taxes decreases as income increasesincreases

… …example??example??

– – sales tax sales tax

- everyone pays the same rate, - everyone pays the same rate,

regardless of incomeregardless of income

What do YOU think???What do YOU think???

…should income tax be proportional, regressive, or progressive??

Activity………Activity………

……”……”A Taxing Argument”A Taxing Argument”

Activity …..do the Activity …..do the math….math….

“ “Richard and Phoebe” worksheetRichard and Phoebe” worksheet

… …like this… like this… 3000 3000 = = x x … cross … cross multiply….multiply….

25,000 10025,000 100

What are the major What are the major types of types of taxes?taxes?

1. Personal income tax1. Personal income tax

determined on annual basisdetermined on annual basis withholding - $ taken out of paychecks withholding - $ taken out of paychecks

based on estimate of what will be owedbased on estimate of what will be owed if more $ is withheld than owed, refund is if more $ is withheld than owed, refund is

received when taxes are filedreceived when taxes are filed

if not enough $ is withheld, $ will be owedif not enough $ is withheld, $ will be owed

taxable income = gross income minus taxable income = gross income minus

exemptions and deductionsexemptions and deductions

exemptions –exemptions –

- set amounts subtracted - set amounts subtracted

for yourself, spouse,for yourself, spouse,

& dependants& dependants

deductions – variable amounts deducted deductions – variable amounts deducted from gross incomefrom gross income

- includes interest on mortgage, charity, - includes interest on mortgage, charity, etcetc

Personal income taxes make up close to 50% of Federal revenue

personal income tax personal income tax == a progressive taxa progressive tax

2. Corporate income tax2. Corporate income tax

- businesses can take many deductions

- makes up about 15% Federal revenue

-progressive tax

Who the heck is Fica, and why is he Who the heck is Fica, and why is he getting so much of my money????getting so much of my money????

Federal Insurance Contributions ActFederal Insurance Contributions Act

3. Social Security and Medicare tax3. Social Security and Medicare tax - Social security – OASDI …- Social security – OASDI … … …Old Age Survivors Disability Insurance Old Age Survivors Disability Insurance - Medicare – health insurance for 65 & older- Medicare – health insurance for 65 & older - income cap - 2008 - $102,000- income cap - 2008 - $102,000 2009 - $106,8002009 - $106,800

- regressive tax- regressive tax

…………Taxes and more taxes…..Taxes and more taxes…..

4. Excise tax4. Excise tax

- tax on the sale or manufacture of a good- tax on the sale or manufacture of a good

- gasoline, cigarettes, alcohol, telephone, - gasoline, cigarettes, alcohol, telephone, cable, etccable, etc

- tax incentive – use of taxation to - tax incentive – use of taxation to

encourage or discourage behaviorencourage or discourage behavior

……” ……”sin tax”sin tax”

- regressive tax- regressive tax

5. Estate & gift taxes5. Estate & gift taxes

estate tax – on value of money & property of estate tax – on value of money & property of a a

person who has diedperson who has died gift tax – on money or property one living gift tax – on money or property one living

person person

gives anothergives another progressive taxes – rate increases as value progressive taxes – rate increases as value

increasesincreases

6. Property taxes6. Property taxes

- local gov’t tax- local gov’t tax

- based on value of property- based on value of property

- usually fixed dollar amount per $1000 - usually fixed dollar amount per $1000

assessed valueassessed value

- regressive- regressive

7. Sales tax 7. Sales tax

- state & local- state & local

- regressive- regressive

Federal revenue - 2007Federal revenue - 2007 $1.1 trillion - $1.1 trillion - Individual income taxIndividual income tax $869.6 billion - $869.6 billion - Social SecuritySocial Security and other and other

payroll taxes payroll taxes $370.2 billion - $370.2 billion - Corporate income taxCorporate income tax $65.1 billion - $65.1 billion - Excise taxesExcise taxes $26.0 billion - $26.0 billion - Customs dutiesCustoms duties $26.0 billion - Estate and $26.0 billion - Estate and gift taxesgift taxes $47.2 billion - Other $47.2 billion - Other

… … Ok, so where does all this money Ok, so where does all this money go??go??

$586.1 billion (+7.0%) - $586.1 billion (+7.0%) - Social SecuritySocial Security $548.8 billion (+9.0%) - $548.8 billion (+9.0%) - DefenseDefense[2][2] $394.5 billion (+12.4%) - $394.5 billion (+12.4%) - MedicareMedicare $294.0 billion (+2.0%) - Unemployment and welfare $294.0 billion (+2.0%) - Unemployment and welfare $276.4 billion (+2.9%) - $276.4 billion (+2.9%) - MedicaidMedicaid and other health related and other health related $243.7 billion (+13.4%) - Interest on debt $243.7 billion (+13.4%) - Interest on debt $89.9 billion (+1.3%) - Education and training $89.9 billion (+1.3%) - Education and training $76.9 billion (+8.1%) - Transportation $76.9 billion (+8.1%) - Transportation $72.6 billion (+5.8%) - Veterans' benefits $72.6 billion (+5.8%) - Veterans' benefits $43.5 billion (+9.2%) - Administration of justice $43.5 billion (+9.2%) - Administration of justice $33.1 billion (+5.7%) - Natural resources and environment $33.1 billion (+5.7%) - Natural resources and environment $32.5 billion (+15.4%) - Foreign affairs $32.5 billion (+15.4%) - Foreign affairs $27.0 billion (+3.7%) - Agriculture $27.0 billion (+3.7%) - Agriculture $26.8 billion (+28.7%) - Community and regional development $26.8 billion (+28.7%) - Community and regional development $25.0 billion (+4.0%) - Science and technology $25.0 billion (+4.0%) - Science and technology $20.5 billion (+0.8%) - Energy $20.5 billion (+0.8%) - Energy $20.1 billion (+11.4%) - General government $20.1 billion (+11.4%) - General government

2007

Capital and Operating BudgetsCapital and Operating Budgets

Capital Budget – expenditures on Capital Budget – expenditures on major projects and investmentsmajor projects and investments

Operating Budget – the day to day Operating Budget – the day to day expendituresexpenditures