Taxes: Somebody Has To Pay

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Presentation transcript:

Taxes: Somebody Has To Pay Module 2.1 & 2.2

What do taxes pay for? Public schools Roads and highways National defense Firefighters/police Safe drinking water Public welfare programs (WIC, food stamps)

Tax theories Ability to Pay Benefits Received Those who CAN afford to pay taxes should pay more than those who can’t People with higher income should pay more than those with lower income. Takes away incentive. Only the people that who use the programs/services would pay the taxes to support them. Example: toll roads

Benefits Received – Unfair? People with limited income benefit more from: Unemployment Public welfare Housing subsidies Do people with little income pay enough taxes to provide the money the receive?

Progressive vs. Regressive Progressive Tax Regressive Tax Takes a larger percentage of income from people in higher-income groups Example: federal income taxes Takes a larger percentage of income from people in lower-income groups Example: sales tax at stores

Progressive – Income Tax

More… The overall tax system in US = progressive $ paid in income tax > $ paid in sales tax Free riders: A problem that happens when people benefit from using goods and services without paying for them.

Why People Don’t Pay Taxes They say it’s illegal. It’s in violation of religious beliefs. It’s not required by the US Constitution.

Punishment If you do NOT report the correct amount of income (underreporting taxable income) … OR If you do NOT file a tax return, you can face criminal prosecution. (fine or imprisonment) Accidental errors on tax forms can still result in fines and penalties

IRS – Internal Revenue Service Division of US Department of Treasury Responsible for maintaining confidence in the federal tax system Has the right to audit a person’s tax return (question anything reported) File your income tax return in time Keep good records of income and expenses Always be honest

Reporting Your Taxes Done each spring – April 15 W-2 to complete tax form HAS to be done

Ethical and Moral Issues Paying taxes is part of their responsibility to others and to society Many complain about paying Some disagree how money is spent Good citizens pay taxes Helps provide public goods

Vocabulary Standard of living – level of wealth w/in country Quality of life – what makes people happy Sales tax - a tax paid on certain goods and services at the point in time they are purchased Voluntary compliance - A system that relies on individual citizens to report income voluntarily Underpaying taxes: knowingly paying less than you’re required to pay