1. Sources of Gov’t Revenue--TAXES
Chapter 9

2. Criteria for Effective Taxes
1. Equity
Must be fair
Want to avoid tax loopholes —when people find a flaw in tax laws that allow some people to avoid paying taxes
The belief of “fairness” is different for each person

3. 2. Simplicity Written so anyone can understand it
Ex. Individual income tax —a tax on peoples earnings is actually 1,000 of pages long but the IRS puts it in terms everyone can understand
Sales tax —tax on most consumer goods
Different for each state

5. 3. Efficiency Must be easy to collect Must be cost efficient
ex. Toll booths collect a tax. Toll must be = or > the cost of employment and upkeep of booths

6. 2 Principles of Taxation
1. Benefit Principle
Those who benefit from the g or s should pay in proportion to the amount of benefit received
Example: gasoline. Tax is included in price of gas. If you drive more, you pay more taxes because you receive the benefit of better roads, more police protection, etc.

7. GAS TAX PER GALLON

8. 2. Ability to Pay
Belief that people should be taxed on their ability to pay
Example: indiv. income tax—people who have a higher income are taxed at a higher percentage

9. Video: Understanding your paycheck--on a separate sheet to turn in
1. What is the difference between gross and net pay?
2. What must be deducted from your paycheck?
3. List some optional deductions.
4. What can you do to minimize your taxes or your taxable income?
5. How many tax brackets are there?
6. How can you increase your income?
7. What is compounding?

10. Types of Taxes Proportional
The same % of tax on everyone regardless of income
Example: if tax is 20%, a person with a $10,000 income pays $2,000.
A person with a $100,000 income pays $20,000

11. 2. Progressive Imposes a higher % of tax on people w/ a higher income
Claims a larger $ amount and larger % of income
Example: income tax

12. 3. Regressive
Tax that imposes a higher rate on low incomes than on high incomes
Social Security Tax
Tax on income up to $80,400. If you make more than this, you do not have to pay a tax on the amount above $80,400.
Example: if you made $80,400 or less you would pay around 7.5 cents per dollar earned in SS tax
If you earned 300,000 you would only be paying 1.7 cents per dollar earned

13. Vocabulary—Grab a book!
1. sin tax
2. individual income tax
3. sales tax
4. payroll withholding system
5. IRS
6. tax return
7. indexing
8. FICA
9. medicare
10. payroll taxes

14. 11. corporate income tax
12. excise tax
13. luxury good
14. estate tax
15. gift tax
16. custom duty
17. user fees
18. intergovernmental revenues
19. property tax
20. tax assessor
QUIZ ON MONDAY USING YOUR VOCAB!!!!!

15. Chapter Review Page 252 Do Identifying Key Terms 1-13 (not number 9)
Just the word—you do NOT have to write out the definition
Reviewing the Facts
1, 3, 4, 5, 6, 9 and 11
Either write out the question and answer OR
Answer the question in complete sentences.

16. True or False Questions
Make 10 true or false questions about taxes (chapter 9) or spending (chapter 10).
I will these out tonight or tomorrow for review.