1. Do Now Write a list of as many types of taxes that you can think of…..

2. Taxes and Spending $$$$

3. What is fiscal policy? If the government is going to work, it must have ways to raise and spend money. –Fiscal Policy is all the ways money is acquired and then used by the government

4. Taxes Taxes are the main source of money for the government –Sometimes used to regulate or prevent an activity that the gov’t believes is dangerous EX: licensing certain activities such as buying/selling guns is a form of taxation –Can be used by Congress to force change EX: levying (adding) a tax

5. Limits on Taxing Power Congress has limits on taxing that are clearly outlined in the Constitution: –Taxes may be levied only for public purposes, not private interests –Taxes may not be placed on exports (goods sent out of the country) –Direct taxes must be evenly collected from the states according to population Congress has not imposed a direct tax since 1861 – Indirect taxes levied by the gov’t must be set at the same rate in all parts of the country

6. Current Federal Taxes Income Tax: a tax collected on the income of corporations and individuals –Income tax rate is flexible = it can be changed depending on how much $$ the gov’t needs –It is also a Progressive Tax – a tax that is in proportion to a person’s income: the higher the income, the more tax is paid –Produces the largest amount of revenue (income) for the gov’t each year

7. Current Federal Taxes Social Insurance Tax: supports the 3 major social welfare programs in the US – Social Security, Medicare, and unemployment –These programs are supported by PAYROLL TAXES: taxes withheld from an employee’s paycheck –These are also REGRESSIVE TAXES: they are collected at a flat rate from everyone, not according to a person’s income

8. Current Federal Taxes Excise Tax: tax on the manufacture, sale, or use of goods and services –Also called the “luxury tax” because the goods taxed are not necessities Food, clothing, and medicine are not subject to the excise tax Federal excise taxes are imposed on gas, tobacco, liquor, firearms, etc.

9. Current Federal Taxes Estate Tax: a levy imposed on the assets (the estate) of a person who dies –Only estates worth more than $3.5 million are subject to federal estate tax Gift Tax: a tax on a gift from one living person to another –Gifts of more than $12,000 are taxed