Federal Taxing & Spending

A) Withholding 1) Government obtains your individual income tax money through withholding 2) The gov’t keeps a certain percentage of your money from each paycheck before it even touches your hands 3) The amount you are paid before taxes is called your gross income 4) The amount you actually receive after taxes is called your net income I) How Taxation Works

B) Tax Returns 1) To determine whether you have paid too much or too little, you must file a tax return each year 2) Verifies how much you earned as an employee 3) If the gov’t withheld too much, you receive an income tax refund 4) If you underpaid, you have to pay the government the extra amount I) Individual income tax

II) Corporate Income Taxes A) Basics 1) Corporate income is third largest source of federal tax revenue a) What are the top two? 2) 8% of all businesses that file returns subject to this tax a) Others make under the federal government threshold for profits earned 3) Corporations deduct expenses, such as buildings and equipment

III) Other Taxes Estate tax Estate tax Tax on property transferred to others after owner’s death Gift tax Gift tax Tax on money or property given by one living person to another Excise tax Excise tax Tax on production or sale of specific product, such as gas Customs duty Customs duty Tax on goods imported from other countries User fee User fee A tax that is charged for the use of good or service, such as parking

A) What is FICA? 1) Federal Insurance Contributions Act 2) Established to help provide for those who cannot support themselves financially a) Elderly b) Disabled c) Unemployed (at no fault of their own) 3) Employers & Employees pay in to FICA 4) Includes both Social Security and Medicare IV) FICA & Social Programs

B) Social Security 1) Established during the Great Depression to help those in desperate need of economic help 2) It’s goal is to provide financial assistance to: a) Elderly or Retired b) Children whose parents have died c) People with disabilities 3) 6.2% of income from a job is paid into Social Security a) The employer matches this percentage to the government b) You are only taxed on the first $94,200 of your income

IV) FICA & Social Programs C) Medicare 1) Established in 1966 as part of President Lyndon Johnson’s “Great Society” reforms 2) It’s goal is to provide health insurance primarily to the elderly or retired a) Currently, there are over 43 million who receive Medicare benefits 3) 1.45% of income from a job is paid into Medicare a) The employer matches this percentage to the government b) Unlike Social Security, there is no limit on how much you can be taxed for Medicare

A) Types of Spending 1) Mandatory Spending a) These are programs that the government must spend money on by law b) Examples of these programs are Social Security, Medicare, military veterans benefits, etc. 2) Discretionary Spending a) These are programs that the government has the option to fund each new year b) Examples of these programs are roads & highways, education, law enforcement agencies (FBI, CIA) c) Largest source of government discretionary spending comes from the U.S. military i) 19% of the entire federal budget is spent on the military V) What Does the Government Pay For?

B) Determining What’s Spent 1) Federal Budget a) Spending plan for the entire year b) Prepared by Congress and approved by the President 2) Appropriations a) Money that is set aside within the federal budget for specific projects or programs b) Members of Congress try to gain support for appropriations to their home districts c) Recall: What is the other name for this money? V) What Does the Government Pay For?

The Story of Ketchikan, Alaska Population: 7800

The Ketchikan International Airport

$398 Million Work project proposed in Ketchikan, Alaska to establish a bridge between the city and Gravina Island In order to pay for the project, Members of Congress had to approve an appropriations bill to grant funding “The Bridge to Nowhere”