1. Taxes
Unit 7.5
Stossel on Taxes (0:00 -7:39)

2. Warm Up What do these words mean to you? Direct- Indirect- Regress-
Progress-
Proportion-

3. I. Constitution and Taxes
Art. I, Sec.8, Clause 1- First power given Congress
“power of the purse”
Used to run government

4. No taxes on churches (1st Amendment)
Limitations
No taxes on churches (1st Amendment)
Taxes used for public purposes only
Appropriations –revenue bill originate in the House of Representatives

5. Early Taxes (Prior to 1912 & the 16th Amend.)
Duties -tax on goods coming in to country, main source of gov’t money for early America
Equal between states
Direct tax- based on population (3/5 compromise included slaves)
It is paid directly to the gov’t
Indirect tax- on goods (liquor tax)
Included in the price of a good or service

6. II. Forms of Taxes Federal Income tax Allowed by 16th Amendment
Progressive income tax- percentage paid goes up with income (determined by “brackets”)

7. Controversy- should it be more proportional?
Proportional tax –everyone pays the same percentage of their income in taxes
Our current progressive tax:
Top 5% pay 50% of all taxes
Question of “loopholes”- ways of getting around paying taxes (charities, not-for-profit status, etc)
tax tables 2013 EZ

8. 3. Corporate income tax- extra tax on corporations -36.9% on profits
4. Capital gains taxes- on stock market profits
Payroll taxes
Social Security
Money for retired and disabled
Matched by employer
Medicare- money for healthcare for elderly

9. C. Other Federal Taxes
Excise Taxes- taxes on goods and services (included as part of the price)
Regressive taxes- As a percentage of your total income you pay, the number goes down the more money you make
Ex: gasoline, tobacco, telephone
Estate tax- tax on inheritances, but gifts up to $12000 are tax free

10. Close Who is exempt from paying taxes? Why?
What is an excise tax? Who pays this kind of tax?
What is income tax? Who pays this kind of tax?
Name an example of a direct tax.
Name an example of an indirect tax.