1. Which is the fairest way for income taxes?
Take the survey & discuss your answers.
Everyone pays the same percentage.
Those with higher incomes pay a higher percentage.
Have no income tax & raise money another way.

2. Chapter 12– Taxes and Taxation

3. Republican political cartoon on taxes:

4. Democratic political cartoon on taxes:

5. What are “Good Taxes”? According to Adam Smith: Simple to understand
Avoid negative incentives
Avoid loopholes
Equity-fairness
Convenience & Efficiency

6. Essential Questions Why & how does the government redistribute income?
How do regressive, progressive, and proportional taxes affect redistribution of income?

7. The Main Ideas
The government redistributes income -through different tax rate structures & creates a safety net that helps alleviates poverty & support social services
Regressive, progressive, and proportional taxes decide -the amount of taxes an individual must pay

8. Where Does the Money Come From?
Federal Government Income Broken Down

9. What Public Goods Does the Money Buy?
Federal Government Spending Broken Down

10. Where Does State Money Come From?
State Income Broken Down

11. What Public Goods Does the Money Buy?
State Government Spending Broken Down

12. What do other countries do for taxes?
“Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, Andorra and the United Arab Emirates (UAE).” Investopedia.com

13. What % do other countries take for taxes?

14. Why Do We Pay Taxes? So that the governments can…
Pay for goods the general public uses
Pay for services the general public uses

15. Progressive, Regressive, and Proportional Taxes
Progressive Tax: As income increases, tax percentage increases
Example) Income of $20,000 pays 15%, vs. income of $100,000 pays 25%
Regressive Tax: As income increases, tax percentage decreases
Example) You can more easily afford to pay sales taxes with a higher income
Proportional Tax: Regardless of income, tax percentage remains the same
Example) Everyone pays 10% at all income levels
Proportional taxes are taxes that stay the same regardless of a person's or business's income. For example, some sales taxes are considered proportional because a tax rate of 8% in a certain state would apply to all customers in that state and take the same fraction of their incomes. Regressive taxes also refer to uniform rates for everyone. These rates are considered regressive because low-income taxpayers are more affected by the rate than those with a higher incomes. This is because the tax takes a larger percentage of their incomes. Someone who earns $400 per week and pays 10% tax on groceries costing $200 would pay $20, or 5% of their income, in taxes. In the same scenario, a person earning $800 per week would only spend 2.5% in taxes
Read more: What is the difference between a regressive tax and proportional tax? | Investopedia
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17. Federal vs. State/Local Taxes
FEDERAL INFORMATION
Most income from
Income taxes
Payroll taxes
Social security taxes
Medicare taxes
Unemployment taxes
Income pays for
Military defense
Highways and roads
Other gov’t programs
STATE/LOCAL INFORMATION
Most income from
Sales taxes
- Income & Property taxes
- Grants from Fed. gov’t
Income pays for
- Education
- Public Welfare
- Roads and repairs
- Public Safety
Police and Fire

18. Types of Taxes Income Taxes
Are charged Federally and by the State
Rates are much different
Federal Income Rate is much higher than the State
Charged against individuals and corporations
Usually considered a “progressive tax”
Federal rates get higher as income increases & so do most state rates

19. Types of Taxes – Payroll Taxes
These are the other things taken from your paycheck each time
FICA – Federal Insurance Contributions Act
Also known as Social Security
Created to make sure people were “secure” when they were no longer in the workforce (1935)
Followed the financial issues of the 20’s
This is a regressive tax
Medicare Tax
Additional tax to help alleviate medical costs to government when people are unable to pay bills themselves
This is a proportional tax

20. Types of Taxes – Transaction and Property Taxes
Sales Tax
Percentage charged upon the purchase of certain items
This is a regressive tax – poorer people pay more.
Real Estate Tax
Percentage charged on the value of land owned
This is a proportional tax.
Personal Property Tax
Percentage charged on all large personal items
Examples: Cars, Boats, Trucks, RVs, etc.

21. Possible Additional Taxes
Localities may opt to charge additional fees.
Registration fees – proportional tax usually
Licensure fees – proportional tax usually
Additional sales tax fees -regressive taxes
Gas taxes or transportation taxes-regressive taxes
Excise taxes – taxes to try to stop a behavior
Additional taxes on cigarettes and alcohol
Goal is to make them too expensive for people to buy
These are regressive taxes.

22. How much money you want to be earning (per year) when you are 30
How much money you want to be earning (per year) when you are 30? What percentage do you think that income has to pay to the government in taxes (in the US)?

23. In reality…
US Federal Tax Rates: (only 3 % of Americans make over $250,000)
Add % more depending on which state you work in

24. Income Tax in USA IRS – tax collection agency in USA
Taxes are deducted throughout year
Every citizen must file every year by:
If you paid more during the year then you need to: you get a refund
If you paid less during the year then you need to: pay the difference

25. What Are Tax Deductions & Loopholes?
Tax Deduction – reduction of your taxable income
Lowers the overall amount (base) you will be charged a tax on
Examples: local taxes paid, student loans, charitable contributions, home mortgage interest
These are deducted b/c they were already paid to a gov’t agency or charity
Tax Loophole-A provision in the laws governing taxation that allows people to reduce their taxes.
Tax incentives
“write offs”

26. What are tax credits? Tax Credit – reduces the actual tax
Government encourages public to purchase specific products for the benefit to the general public
Example: Hybrid cars, energy efficient windows/appliances
Helps in reducing other bills for government long term

27. https://smartasset.com/taxes/virginia-tax-calculator

28. What does the Federal & State Governments take out of my pay?