1.  Taxes

2. Major items where are taxes are used Local TaxSchools, Public Works, Parks, Police, Fire, Local Roads State TaxHealthcare, State Highways, Education Federal Tax Social Security, Military, Healthcare, Welfare, Consumer Protection Agencies, National Parks

3. Tax Principles Benefit Principle: Taxes are paid by those who benefit from the good or service. Ability-to-Pay Principle: Taxes are paid according to ones income level.

4. Types of Taxes Progressive Tax: Those who earn a higher income pay a higher rate of taxation.

5. Types of Taxes Proportional Tax: Same rate for all income levels. A.K.A. “flat tax”

6. Types of Taxes Regressive Tax  A tax that takes a larger percentage from low- income people than from high-income people.  Generally a tax that is applied uniformly (sales tax)  Hits lower-income individuals harder.

7. Collection Methods Direct Paid DIRECTLY to the Government  Income and Property Taxes Indirect Taxes that are included in the cost of a good or service.  Rent

8. Excise/Sin Taxes  A tax designed to increase the cost of a good or service.

9.  Income Taxes

10. Tax Terms Pay-As-You-Earn  Income tax is taken at each pay period.  Ensures regular payment.

11. Tax Terms Gross Income: Total Income before deductions Net Income: Income left after deductions.

12. Tax Terms FICA: Medicare & Social Security Combined *Employers match payments

13. Tax Terms W-2 Form:  Completed by you when starting a new job.  Determines withholdings (taxes taken out)  The more allowances claimed, the less withheld from each paycheck  Can be revised anytime

14. Tax Terms W-4 Form:  A summary of earnings and taxes paid for the year  Must be mailed to you by January 31 st by employer

15. Tax Terms 1040EZ Form: Use only if:  Make less than $100,000  Under age 65  You claim no dependents  Only salaries, tips and no more than $1,500 of taxable interest

16. Tax Terms Deductions: Expenses that can be used to lower taxable income.