1. Chapter 12 Paying for Government
American Civics
2/10/2018
Chapter 12 Paying for Government
Section 1: Raising Money
Section 2: Types of Taxes
Section 3: Managing the Country’s Money
Chapter 12

2. Section 1: Raising Money
Section 1: Raising Money
The Main Idea
Each year the local, state, and federal government provide Americans with services such as police, schools, highway construction, and defense. These services cost huge amounts of money. The government pays for these services with taxes collected from citizens.
Reading Focus
Why is the cost of government so high?
What guidelines do governments use when taxing citizens?
Other than taxes, what are two ways to pay for government?

3. The cost of government is high due to:
Section 1: Raising Money
The cost of government is high due to:
Population= over 281 million
Rising cost of living
More government programs and services (like defense spending and payments to the elderly, disabled, or impoverished)
National debt

4. Deciding how to spend the govt’s money:
Section 1: Raising Money
Deciding how to spend the govt’s money:
Officials establish government’s priorities
Priority is based on urgency and need
Debate over the country’s priorities is common

5. Principles of taxation:
Section 1: Raising Money
Principles of taxation:
Ability to pay—based on earned incomes
Equal application—tax applied at the same rate for similar taxable items
Scheduled payment—taxes due by April 15
Fees, fines, and payments for special services also raise government funds.

6. Principles of Taxation
SECTION 1
Question: What guidelines do governments use when taxing citizens?
ability to pay
Principles of Taxation
equal application
scheduled payments

7. Section 2: Types of Taxes
The Main Idea
Taxes are the main source of revenue for the local, state, and federal governments. The types of taxes each level of government uses to raise money vary.
Reading Focus
What are the two main kinds of income taxes?
What are the other major types of taxes?

8. Different types of taxes:
Section 2: Types of Taxes
Different types of taxes:
Individual income tax—largest source of tax revenue; most citizens pay federal, state, and local income taxes
Sales and excise tax—sales taxes are collected by state or local govts; excise taxes (on “luxury” items) are collected by the federal govt
Property taxes—chief income for most local govts; funds public education

9. TYPES OF TAXES

10. Section 2: Types of Taxes
Estate, inheritance, and gift tax—estates of the deceased, inheritance, and monetary gifts above $10,000 are taxable by the federal govt
Import tax—tariffs on imported products used to regulate trade

11. Tax Rates: Section 2: Types of Taxes
Section 2: Types of Taxes
Tax Rates:
Progressive taxes: You pay more the more you make; Example: individual income tax
Regressive taxes: You pay more the less you make; Example: sales taxes
Proportional taxes: You pay a fixed percentage of your income

12. Tariffs and the U.S. Economy
Section 2: Types of Taxes
Tariffs and the U.S. Economy
Tariffs=taxes placed on goods imported from foreign countries.
Tariffs HELP the U.S. economy by:
Regulating trade
Protecting American industries against foreign competition
Raising prices on foreign goods

13. SECTION 2
Question: What are the differences between progressive and regressive taxes?
takes a larger percentage of income from lower-income groups.
PROGRESSIVE TAX
takes a larger percentage of income from higher-income groups.
REGRESSIVE TAX

14. Section 3: Managing the Country’s Money
Section 3: Managing the Country’s Money
The Main Idea
The federal, state and local governments collect and spend many billions of dollars each year. Each level of government has systems to manage public funds.
Reading Focus
How do governments collect public money?
What steps are involved in spending public money?
How do governments account for your money?

15. How governments collect public money:
Section 3: Managing the Country’s Money
How governments collect public money:
Internal Revenue Service (IRS)—collects federal taxes
U.S. Customs Service—collects taxes on imported goods
State and local governments collect taxes through their own collection agencies.

16. Steps in creating the federal budget:
Section 3: Managing the Country’s Money
Steps in creating the federal budget:
1. Office of Management and Budget (OMB) and the president prepare the budget.
2. The prepared budget is published and sent to Congress for study.
3. Congress debates the budget and makes changes.
4. Both houses must approve the budget.
5. The budget is passed with 13 appropriations bills.
6. Bills are sent to the president for approval or veto.

17. The National Debt Section 3: Managing the Country’s Money
1970–1997—The govt spent more than it collected.
Money was borrowed to make up the difference.
Interest on the borrowed money increases the debt.
Govt bonds used to borrow money are being bought by foreign investors.

18. Government Collection of Public Money
SECTION 3
Question: How do governments collect public money?
Government Collection of Public Money
Federal “collection agency”
Internal Revenue Service
Role of the “collection agency”
collects individual income taxes, corporate income taxes, Social Security taxes, excise taxes, estate taxes, and gift taxes
State and local “collection agencies”
collects state income and inheritance taxes as well as local property taxes

19. Chapter 12 Wrap-Up
1. Identify six reasons for the high cost of government.
2. Identify and explain the principles the government uses to try to make taxation fair.
3. Why must governments borrow money? How do they borrow money?
4. How is individual income tax calculated, and how do citizens pay individual income taxes?
5. What is the difference between a progressive tax and a regressive tax, and what is an example of each?
6. What is the difference between a surplus and a deficit?
7. What is the national debt, and how might it be harmful to the country?