1. Paying For Government: Types of Taxes

2. Individual Income Taxes
The largest source of income for the federal government is income taxes
Taxes on the earnings of individuals and companies
Allowed to deduct a certain amount for yourself or your dependents (people who rely on you, such as your children)- this is called an exemption
You’re also allowed to deduct certain expenses (deductions)
Charitable donations, most business expenses, or interest paid on home mortgages

3. Individual Income Taxes
The amount of income left after all subtractions are made from total income is called taxable income
The amount from which your income tax is paid
Income taxes are progressive- takes a larger percentage from higher-income groups and a lower percentage from lower-income groups
Based on ability to pay, or how much you make

4. How Do We Pay?
U.S. taxpayers must fill out and mail their tax forms before April 15 each year
You can also electronically file your taxes
Income taxes are already taken out of paychecks
Tax forms show you how much you owe in taxes for the previous year
Whether or not you get a refund or owe more depends on your amount contributed in the previous year, plus any deductions or exemptions

5. State/Local Taxes & Corporate Income Taxes
All but a few state governments collect individual income taxes
These rates are much lower than the federal income tax
Corporations pay taxes based on their profits
Can also deduct certain amounts to lower their taxable income (buying new machinery or paying employee salaries)
Corporations that make more money are taxed at a higher rate

6. Social Security Taxes
Money collected from social security taxes provide income to retired and disabled Americans
Taxes paid by workers are matched by the employers

7. Sales & Excise Taxes
Sales taxes are taxes collected on most any product sold in a particular state
A 5% sales tax means you would pay $1.05 for something listed as $1.00
Sales taxes are regressive- takes a larger percentage of income from lower-income groups than high- income groups
If a wealthy and poor person buy the same smart TV, the taxes on the TV will take a higher percentage of the poor person’s money

8. Sales & Excise Taxes Excise taxes are sales taxes on “luxury” items
Airplane tickets, gasoline, alcohol, luxury automobile, tobacco
Sometimes intended to discourage the use of potentially harmful products like alcohol or tobacco

9. Property Taxes
Property taxes are the chief source of income for local governments
Taxes on the value of property owned by a person or business
Collected on two types of property:
Real Property- land, buildings, and other structures
Personal Property- stocks, bonds, jewelry, cars, and boats
Difficult to determine the value of personal property- most states will just tax real property
If personal property is taxed, the rates are usually very low

10. Taxing Real Property
Tax assessors visit a property and determine its value
Local government adds up the assessed value of all property in a certain area and determines the total amount of money it needs from the property tax
It divides this amount of money needed by the total assessed value of property in that area to come up with the property tax rate
Property taxes in city limits are higher than in rural areas
Much of the funding from public schools comes from local property taxes
Critics say this system is unfair because wealthier communities have higher property values, and therefore contribute more money to their schools versus low income communities

11. Estate, Inheritance, & Gift Taxes
If someone dies, that person’s heirs may have to pay taxes on property left behind
Real estate, money, personal property
Estate taxes are federal taxes on the wealth a person leaves behind
Rates depend on the value of the estate left behind

12. Estate, Inheritance, & Gift Taxes
Individuals may also be taxed on the share of the estate they inherit
Different from an estate tax- inheritance taxes is based on the portion of the estate received by an individual
Estate taxes are based on the value of the entire estate before it is divided up

13. Estate, Inheritance, & Gift Taxes
Even gifts of money are subjected to being taxed
Gift taxes must be paid by any person who gives a gift worth more than $10,000
Money, cars, houses

14. Import Taxes
U.S. government collects taxes on products imported into the country from foreign countries
Import taxes are called tariffs
Tariffs are primarily used today to retaliate against foreign tariffs on U.S. goods or to protect American industries from foreign competition
If we place a tariff on a certain product, foreign countries might not ship as much of that product to avoid paying us the tariff
Foreign countries pay their workers less, so lower labor costs = manufacturing goods less expensively = these goods can be sold in the U.S. for far less money than American products = American industries losing business and laying off workers
Tariffs can raise the price of these goods to protect against unfair competition

15. ? What is the largest source of income for the federal government?
What is a progressive tax? What is a regressive tax?
Many public schools are funded by property taxes. What is the big criticism of this method of funding public schools?
What is the difference between estate and inheritance taxes?
How do tariffs protect American industries?