Taxes

Tax - A required payment to a local, state, or national government Tax - A required payment to a local, state, or national government. Used to pay for the costs of running the government, and the programs, projects, and facilities the government creates for the people. Revenue - the income received by a government from taxes and other non-tax sources

Three types of Taxes Proportional Tax - The percentage of income payed in taxes is the same for all income levels. Ex. everyone pays a 6% income tax, at all income levels Progressive Taxes - The percentage of income payed in taxes increases as income increases Ex. You pay more as you make more, Tax Brackets Regressive Taxes - The percentage of income paid in taxes decreases as income increases Ex. Our current sales tax system Ex. Everyone pays $4 to use the toll road Which is the most fair? What does our income tax look like?

Progressive Income Tax Out of $500, almost $125 is paid in taxes. And the more you make, the more you pay. Where does all this money go?

Progressive Tax System CA State Income Tax Progressive Tax System If your income range is between $0 and $7,168, your tax rate on every dollar of income earned is 1% $7,169 and $16,994, your tax rate on every dollar of income earned is 2% $16,995 and $26,821, your tax rate on every dollar of income earned is 4% $26,822 and $37,233, your tax rate on every dollar of income earned is 6% $37,234 and $47,055, your tax rate on every dollar of income earned is 8% $47,056 and $1,000,000, your tax rate on every dollar of income earned is 9.3% $1,000,001 and over, your tax rate on every dollar of income earned is 10.3%

California Sales Tax - Regressive Tax 7.5% tax on everything you purchase Why is this a Regressive Tax if everyone pays the same % percentage? Middle income: $35k/yr pays 37 cents on DWBC High income: $300k/yr pays 37 cents on DWBC

Tariff - Taxes on imported goods The government might also design taxes or tax credits that gain revenue, while simultaneously discouraging or promoting the purchase of a good. Tariff - Taxes on imported goods Used to protect American farmers and industries. Increases prices of imports, keeping the price of American products competitive.

Excise Tax - General revenue tax on the sale or manufacture of a good. Usually exists for a purpose related to the good. Cigarettes cause many health issues that taxpayers end up paying for through government provided healthcare. Cigarette Excise Tax The excise tax on cigarettes raises revenue to fund government provided healthcare, and discourages the purchase of cigarettes.

But, after .65 cents in taxes, your gallon of gas cost $4.21 On February 25, 2013, the actual cost of a gallon of gasoline was only $3.56 But, after .65 cents in taxes, your gallon of gas cost $4.21 this excise tax has a purpose: To collect revenue and pay for pollution and environmental projects

Tax Credits and Incentives Eco Friendly Auto Tax Credit Tax Incentive In order to promote the purchase of Eco Friendly vehicles, and to decrease the consumption of gasoline, the government offered tax credits that would reduce the amount of tax you had to pay at the end of the year.

If the government increase taxes rates tax revenue will increase The Laffer Curve If the government increase taxes rates tax revenue will increase % Tax Rate If the tax rate becomes too high, tax revenue will fall since workers have no incentive to work harder Tax Revenue 12

But, the revenue collected from these taxes goes to pay for

How the government spends its (our) money Government Spending How the government spends its (our) money

Out of $500, almost $125 was paid in taxes. Where does all this money go?

Federal Spending National government Mandatory Spending - money that lawmakers are required to spend on certain programs or to use for interest payments on the national debt. Example: Social Security, Interest on Debts to China, Welfare Programs Medicare - national health insurance program for people over 65 or who are disabled Medicaid - Program benefiting low-income families, people with disabilities, and elderly

Discretionary Spending - Spending in which the government can make choices. Government uses their discretion, or makes a decision, to include, remove, increase, or decrease funds for specific programs in the government budget.

State Discretionary Spending

Local Governments The primary source of local government revenue is property taxes. Responsible for paying for public schools, parks, roads, law enforcement