1. Paying for Government

2. The High Cost of Government
The three largest costs of government:
Benefits to individuals
Retired
Elderly
Disabled
Needy
National defense
Military
Weapons
Combat/operations in other countries
National debt
The government spends more than it takes in
Must pay interest-extra payment for borrowed money
Debt is now in the trillions!

3. Reasons for Increased Costs
Population growth
More people=more $
Over 300 million in the US
Increasing prices/cost of living
Increase in the number of people receiving benefits (entitlements)
Increasing national debt
Deficit: the government spends more than it takes in
Surplus: the government takes in more than it spends
More services being provided by the government
Increasing size of government
Large sums spent on defense

4. Two Choices The government has two choices to deal with its costs
Taxes-compulsory payments by citizens and businesses
Cutting spending

5. Taxes vs. Cuts Increase revenue Taxes can control activities
Cutting Spending
Increase revenue
Money for the government
Taxes can control activities
Discourage imports
Decrease smoking and alcohol use
People generally do not like to pay taxes
How do you decide how much to tax, what to tax, and who to tax?
Does not increase the amount of money people have to pay to the government
Leaves money in the economy
What happens to people who rely on government programs?
Which programs does the government cut?
Priorities
Taxes vs. Cuts

6. Other Ways to Raise Revenue
Fees
Small payments charged for services and licenses
Fine
Penalty for breaking certain laws
Direct Payment
Parking meters
Toll roads
Borrowing
Bonds

7. Types of Taxes

8. Income Taxes Tax on money that people or businesses make
All people with jobs pay these taxes
Deductions:
Money subtracted from taxes for certain expenses
Exemptions
Money subtracted from taxes based on family members
Income tax is a progressive tax
The more someone earns, the more money that is taken out
Most states also collect income taxes from its residents

9. Social Security Taxes
Taken out of a worker’s paycheck by the federal government
Mainly provides income to retired people or people with disabilities
Tax paid by each worker is matched by the employer

10. Sales Taxes States create the sales tax requirements for their state
Collected on most products that are sold
Regressive Tax
Takes a larger portion of income from low- income groups

11. Excise Taxes Collected on certain goods and services
Tobacco
Alcoholic beverages
Gasoline
Luxury automobiles
Collected by the federal government and many state governments

12. Property Taxes Main source of income for local governments
Tax on the value of property owned by a person or business
Real Property: land, buildings, and other structures
Personal Property: stocks, bonds, jewelry, cars, and boats

13. Other Taxes
Import Taxes: called tariffs, these are meant to lower competition between the US and foreign countries
Estate Tax: tax on the wealth a person leaves behind when they die
Collected by the federal government
Inheritance Tax: tax on the portion of an estate that is inherited
Collected by the state government