Write down your predictions… A prize to the person who comes closest to guessing the following amounts: 1.How much tax money did the federal government.

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Presentation transcript:

Write down your predictions… A prize to the person who comes closest to guessing the following amounts: 1.How much tax money did the federal government collect in 2012? $2.468 trillion! 2.How much tax money did all governments (federal, state, and local) collect in 2012? $5.132 trillion!

Economics of Taxation Unit 6

Principles of Taxation 2 basic principles of taxation Benefit Principle – Those who receive more benefits from the government should have to pay more in taxes Examples? – Highway tolls (drivers use the roads more so they pay more) Ability-To-Pay Principle – Those who have more money should pay more in taxes Examples? – Income tax

Types of Taxes Proportional Tax (Flat Tax) – Everyone pays the same percentage of their income Does that mean everyone pays the same amount of taxes? – NO! Progressive Tax – The more you make, the higher the percentage of your income you pay Example? – Federal income taxes Regressive Tax – The more you make, the lower the percentage of your income is paid for taxes Example? – Sales Tax

Tax Vocab When a tax is considered to be fair for everyone, it is referred to as an equitable tax When a tax has certain conditions that allow some people to avoid paying it, these conditions are known as tax loopholes – Video

Taxes & Consumer Behavior The government can use taxes to encourage or discourage people from buying/doing certain things – Example: Mortgage Interest Tax Credit Encourages people to buy houses Taxes that are used to discourage certain behaviors are known as sin taxes – Taxes on things that are thought to be unhealthy or immoral – Examples? Cigarette tax Alcohol tax

Quick Review 1.When a tax is said to be equitable, what does this mean? – It is fair for everyone 2.According to the benefit principle of taxation, who should have to pay the most in taxes? – Those who use the most government services 3.What type of tax takes away a larger percentage of income from those who make more? – Progressive tax 4.Why does the government impose sin taxes? – To discourage people from unhealthy or immoral behaviors