Forms of Taxation Progressive, Regressive, and Flat Rate Taxes

Today’s Objective  After today’s lesson, students will be able to…  Explain the difference between progressive, regressive, and flat rate taxes  Essential Skill:  Explicitly assess information and draw conclusions

Quick Review  What is Mandatory Spending?  What is Discretionary Spending?  What is the Free Ride Problem?  What is Privatization?  What is the Public Sector?

Background on Federal Taxes  Levied and established by Congress  Collected by the Internal Revenue Service (IRS)  Tax return due by April 15 th

Forms of Taxation  Find a partner  Use your notes to complete the definition column of the sheet and the progressive/regressive section if you can find the information  Also, fill in the rates for the first 4 taxes

Federal Tax Revenue: 2015

Limits on Federal Taxation  Have to tax on public concerns  No taxation of exports  Direct taxes have to be applied equally amongst the states (except income tax)  Haven’t been used since the Civil War  All indirect taxes set at the same rate  Can’t tax state government functions that provide for the public (education, transportation, etc.)

Forms of Taxation Progressive, Regressive, and Flat Rate Taxes

Today’s Objective  After today’s lesson, students will be able to…  Explain the difference between progressive, regressive, and flat rate taxes  Essential Skill:  Explicitly assess information and draw conclusions

Progressive Tax  The more you earn, the higher rate you pay  Not everyone pays the same percentage of taxes  32|479|543/10.1|14.9|25.0|28.1|33.0|35.1/params/1|1|1|0|1| 15/name/Current%20tax%20code%20%282012% |479|543/10.1|14.9|25.0|28.1|33.0|35.1/params/1|1|1|0|1| 15/name/Current%20tax%20code%20%282012%29  Why? What is the rationale behind progressive taxes?   Example

Regressive Tax  TEXTBOOK DEFINITION IS WRONG!  Regressive Taxes  taxes which affect lower income earners at a higher rate and higher income earners at a lower rate (cap on the amount you can be taxed on)  Proportional Flat Tax:  Taxes levied at a fixed rate, without regard to the level of the taxpayers income or his/her ability to pay them ( no cap)

As income increases, the share of it paid on cigarette tax decreases Income

Amount 4.2%Tax paid in $% of Income 42K $1,7644.2% 85K $3,5704.2% 110K $4,6204.2% 300K110K$4,6201.5% 2 M110K$4,6200.2% 50 M110K$4, % Regressive: Payroll Tax

Sample Pay Stub  Using your notes complete the tax deductions on Chris’s earnings statement  The write his net pay in the check

Scenario TomLarryJohnny -20 hrs/week -Sig. other does not work -No savings Total:$25, hrs/week -Sig. other makes $25,000 part- time -No savings Total: $75, hrs/week -Sig. other makes -$50,000 full-time -Savings and investments Total $150,000

Which Tax is Fairest?  Progressive  Regressive  Flat Tax

Questions 1.Who CREATES the federal budget? 2.Which is larger, mandatory or discretionary spending? 3.Name one category of mandatory spending. 4.What do we spend most of our discretionary funds on? 5.Who has the power to levy taxes? 6.Name some factor that can affect the contents of the federal budget. 7.What does a person need to meet in order to receive entitlement benefits? 8.What is the difference between the private and public sector? 9.What is a flat tax? 10.Name something that Congress CANNOT tax

Questions 1.Where does the Federal Government get most of its tax revenue from? 2.What kind of tax is a purely flat tax? 3.What is our best example of a regressive tax? 4.How are excise taxes regressive? 5.What is a payroll tax? 6.Who do estate taxes affect the most? 7.What is the difference between national debt and deficit? 8.What are federal outlays? 9.What is a surplus? 10.What day do your tax returns need to be filed by?