Tariff Laws-with Nathan https://www.youtube.com/watch?v=n6BNE62xGqE

Chapter 14: “Taxes and Government Spending”

Funding Government Programs Citizens of the United States authorize the government, through the Constitution and elected officials, to raise money through taxes Taxation is the primary way that the government collects money (raises revenue) Without revenue, or income from taxes, government would not be able to provide goods and services

The Constitution The Power to Tax Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax… The Sixteenth Amendment gives Congress the power to levy an income tax Limits on the Power to Tax The power to tax is also limited through the Constitution: The purpose of the tax must be for “the common defense and general welfare” Federal taxes must be the same in every state The government may not tax exports

Where to get taxes A tax base is the income, property, good, or service that is subject to a tax…

Types of Tax Schemes Proportional Taxes A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels: A.KA. Flat Tax e.g. Social Security up to $100k - some Eastern European countries, some state taxes

Types of Tax Schemes (cont.) Progressive Taxes A progressive tax is a tax for which the percent of income paid in taxes increases as income increases e.g. US federal income tax

Types of Tax Schemes (cont.) Regressive Taxes A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases e.g. Sales tax, gas tax

Is there a good tax? A good tax has the following characteristics: Simplicity Tax laws should be simple and easily understood. Efficient Government administrators should be able to collect taxes without spending too much time or money. Certainty It should be clear to the taxpayer when the tax is due, how much is due, and how it should be paid. Equity The tax system should be fair, so that no one bears too much or too little of the tax burden.

Who Bears the Burden of a Tax? To fully evaluate fairness of a tax, it’s important to think about who bears the burden of it. The incidence of a tax is the final burden of the tax. REMEMBER: If demand is inelastic, a tax will increase the price of a good and consumers will bear a large burden of the tax. If demand is elastic, the opposite is true…

Tax Burdens Elasticities of Demand and Tax Effects Quantity Price $1.40 $1.00 Lower quantity Inelastic Demand Higher quantity New supply with $.50 tax Original supply f i Demand Elastic Demand Lower quantity Higher quantity Quantity Price $1.10 $1.00 New supply with $.50 tax Original supply i g Demand

Quick Review 1. The power to tax is granted by the United States Constitution to (a) the Treasury Department. (b) Congress. (c) the President. (d) the Supreme Court. 2. All of the following are characteristics of a good tax except (a) economy (b) certainty (c) revenue (d) equity

Taxes-Crash Course https://www.youtube.com/watch?v=7Qtr_vA3Prw

Ron Swanson teaches Tax https://vimeo.com/57723506

Government Expenditures C+I+G+(X-M) Government Expenditures

Government Expenditures Government expenditures are made up of government purchases and transfer payments Government purchase- a good or service purchased by the government (government hiring a private contractor to build a house) Transfer payments-made to individuals by the federal government through various social benefit programs (Social Security) Over time the percentage of government purchases have decreased while the percentage of transfer payments have increased

Expenditures and Revenue Federal Government Main expenditure- pensions, income security, national defense, health costs, and interest on the public debt Main revenue- personal income tax State Government Main expenditure- education, public welfare, health and hospitals, and highway maintenance Main revenue- sales and excise tax Local Government Main expenditure- education Main revenue- property tax

Gross Tax vs. Taxable income Gross is how much make overall. Taxable income is your income after deductions.

FICA What kind of Tax did we say Social Security was? Federal Insurance Contributions Act funds Social Security and Medicare Social security established in the 1935 during the Great Depression What kind of Tax did we say Social Security was?

Types of Taxes Excise tax – an indirect tax, general revenue… boats, cars, etc. Estate tax – when you die and pass on your wealth Gift tax – tax on gift of property Import tax – taxes on foreign goods Sin tax – a sumptuary tax, taxes on alcohol, tobacco, sodas, candy, etc. Property tax – tax on land

Tax incentives Government taxes or doesn’t tax something in order to encourage or discourage certain behaviors. For example, taxing cigarettes and tax break on hybrid cars.

Types of Government Spending mandatory = has to be spent, already voted into law discretionary = up to politicians on whether or not to spend it

Medicare and Medicaid Medicare – “care” for the elderly Medicaid – “aid” to the poor  Baby Boom Pay as you go system (variation) – current workers pay for current retirees What issues might the Baby Boomers create for Medicaid?

Balanced Budget Revenue = spending states require it so they don’t have to borrow $$$ the single largest expenditure in most state governments Education  other services provided by states: highways transportation public safety public welfare arts recreation

Property Taxes tax on land and/or buildings Local government some state government

Tax Discussion What type of tax is this mostly effecting (Progressive, Proportional, Regressive)? What is one change to the tax code that you agree with? Why? What is one change to the tax code that you disagree with? Why? If you cannot find a single thing you agree/disagree explain two pieces you agree/disagree with

Problems with Social Security Large number of baby boomers set to retire within the next 20 years Advances in medicine Increased Life expectancy

Banking on Bitcoin https://www.youtube.com/watch?v=FzEUl8iag-0