1. Taxes

2. How does the government get its money? (Taxes and others)
Sales tax
Lottery
Fuel taxes
Vehicle registration
Property taxes
Corporate taxes
Income taxes
Federal
State
City (sometimes)
Import/export
Sin taxes additional tax on alcohol, tobacco, etc.
Tolls
Medicare
Social Security

3. What does the government use our tax dollars for?
Infrastructure – bridges, highways, utilities
WIC
Street lights
Military
Police
Fire department
EMS
Political paychecks
Student loans
Medicaid
Medicare
Social security
Parks
Sewers
Mail delivery
Grants to businesses
FDIC/bank oversight
Student grants
Museums/cultural opportunities
National parks
Demolition of properties
Government workers
CPS
Disaster assistance
Schools
Garbage pick-up
Leaf pick-up
Recycling pick-up
Roads
City grass
Grants for housing
Road salt
Plowing
Cutting city grass
Recreation
Food stamps/bridge cards
Grants for repairs
Obamacare
City events/festivals
Grants for education programs
Section 8
Courts
Jails/prisons
Jury pay
Secretary of State
Registry
Probation officers/parole officers
Grants for homeless shelters
Dog shelters/animal control officers
Air traffic control
FBI, DEA, ICE

4. Sales tax Sales tax is a percent of a purchase
Michigan sales tax is 6%
To calculate sales tax:
Change percent to a decimal (divide by 100 or move decimal 2 places to the left)
Multiply that by the cost of the item
Ex: Shirt costs $40. 6% sales tax
6% of $40
6%/100 = .06
.06 x 40 = 2.4 or $2.40 in taxes
To get total cost add the sales tax to the price of the item
$2.40 in tax + $40 shirt = $42.40 out the door

5. Sales tax I buy a car for $6000. How much do I owe in sales tax?
I buy a book for $12. How much do I owe in sales tax?
I buy an outfit for $80. How much do I owe with tax?

6. Sales tax I buy a car for $6000. How much do I owe in sales tax?
6% of $6000
.06 x 6000
$360
I buy a book for $12. How much do I owe in sales tax?
6% of $12
.06 x 12
$.72
I buy an outfit for $80. How much do I owe with tax?
6% of 80
.06 x 80
$4.80
$80 + $4.80 = $84.80

7. Property tax Taxable value is ½ of market value (what house is worth)
House worth $200,000 has a taxable value of $100,000
Property tax rate is figured in mills.
One mill is 1/1000th of a dollar
To calculate property taxes:
(Taxable value/1000) x mills
Ex.: Detroit’s tax rate is 67 mills. A house has a taxable value of $30,000.
(30,000/1000)x67 = 30x67=$2010
If the market value of a house is given, you must find the taxable value first (cut it in half)

8. Social Security Tax
6.2%
Used to fund Social Security Payments to retirees and disabled persons
Pay this until you hit retirement age

9. Medicare
1.45%
Used to fund medicare (health insurance) payments for retirees
Pay until you hit retirement age

10. Federal Income tax Percent varies based on income
File a tax return to see if you overpaid or underpaid

11. State Income tax
4.25%
File a tax return to see if you overpaid or underpaid

12. City Income tax Only some cities (tends to be big cities)
2.4% for residents
1.2% for those who work in Detroit
File a tax return to see if you overpaid or underpaid

13. Other things possibly taken out of Paycheck
Health insurance payments
Retirement plan payments (Pension)
401K/403B payments (optional)
Wage garnishments (Child support or lawsuit)
Flexible spending for health or daycare (optional)
Health Savings Account (optional)

14. Graduated income tax
As your income increases, the percentage of your income that goes to taxes increases
Everyone pays the same percent at the same income level
Ex. First $6000 = no taxes
$ ,000 = 10%
$10,000-$36,050 = 15%
$36,050 - $67,700 = 25%
$67,000-$84,000 = 27%

15. W-2 Form Sent by Jan. 31st of each year
Shows how much you earned that year and how much you paid in taxes
Used to complete your tax return and see if you paid too much or paid too little
Copies are sent in with your tax return

16. Tax deductions
The IRS allows you to deduct certain things from your income
This reduces your taxable income and reduces your tax bill
Deductions are a big reason why people get tax refunds
Common deductions:
Personal deduction – a standard deduction for all adults in your house
Child deduction – deduction for all of your dependents
Home mortgage deduction – Deduct the interest you pay on your mortgage
Student loan interest deduction – deduct the interest you pay on your student loans
Charitable contributions – deduct money you give to charity
Medical expenses – deduct medical expenses if they exceed 7% of your income
IRA contributions – pretax contributions to retirement

17. Additional ways to lower taxes
Some things are paid for BEFORE taxes are taken out of your paycheck
This lowers your taxable income
Includes things like:
Health insurance
401K/403B
Pension plans
Flexible spending accounts for child care or medical bills
Health savings accounts for medical expenses

18. W-4 Form Completed when you start a job
Used to help your company determine how much to take out in taxes
Deductions (based on the number of dependents you have) are identified on the form to help get a better idea of how much to take out
The higher the number, the less they take out in taxes
If the number is too high you’ll end up owing money
The lower the number, the more they take out in taxes
If the number is too low you get it back at the end of the year
(But you’re giving an interest-free loan to the government
Check exempt only if you’re sure you won’t have a tax bill that year