1. “Nothing is certain but death and taxes”
Chapter 9 - Taxation
“Nothing is certain but death and taxes”

2. Criteria for Effective Taxes
Fair/ Equitable – few loopholes
Simple – easy to u-stand
Efficient – easy to administer and generate revenue for gov.

3. 2 Principles of Taxation
Benefit principle = those who benefit should pay in proportion to the amount of benefits they receive.
Ability-to-pay principle = according to income, regardless of benefits they receive + + =
50% = =
10%

4. Types of taxes Proportional = same % for everyone 2. Progressive =
higher % for higher incomes
3. Regressive =
opposite of progressive

5. Federal Gov. Taxes 1. Almost ½ of their rev. comes from income tax
FICA (Fed. Insurance Contributions Act) = Largest source of gov. rev. - mainly pays for Social Security and Medicare (“Revolving Door” – ‘it pays for itself’)
Corporate income tax – from 15 to 35%
*Remember, “Corporations are people too”  , so they have to pay taxes on their ‘income’.

6. Federal Gov. Taxes – other ways the fed. Gov. get revenue:
Excise taxes – ‘luxury’ items
Sin Taxes – behavior adjustment
Estate taxes and gift taxes
Customs taxes – (imports)

7. State and Local Taxes - intergovernmental revenues - sales tax
- property tax
- income
- lottery?

8. How do they collect? Federal gov. = IRS State gov. = the Tax Board
Mostly it comes out of your paycheck (it is ‘withheld’)
You will file your official tax return by April 15
You may receive a ‘refund’ or be made to pay more, depending on how much was withheld and how much $ you made

9. Federal Spending

10. Based on the ‘fiscal year’, as opposed to the ‘calendar year’.

11. Mandatory Spending
Those items that don’t need Congressional approval. (“The money is already spent.”)
Social Security
Medicare
Interest on the National Debt

12. Discretionary Spending
Those items that require approval from Congress from year to year
Appropriations Bill = a law that allocates money to a particular program (goes through the traditional ‘Bill to a Law’ sequence)
National “Defense”
Veterans benefits
“Income Security”
Agriculture
Transportation
Education
International Affairs
Science/Space/Technology

13. The Process:
President & his administration come up with a proposal – called “The 2013 Budget”
Sends it to Congress
Congress slashes, adds, amends
Sends it back to President
President signs it – becomes the plan for expenditures for the coming year.

14. Federal Debt & Deficit
The amount of money that the U.S. Gov. spends over and above what they took in (Spending – Revenue = Deficit)
National Debt = the total “credit card bill” that has accumulated thus far.