Transcript /cms/lib6/AZ01001175/Centricity/Domain/5916/Taxes.ppt

Taxes
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What is a tax?A tax is a required payment to a local, state,
or national government
Why does a government require taxes?
Taxes are the primary source of revenue for
the government to pay for its public goods
and services
What gives a government the right to tax?
Written in that government’s constitution
Taxes
What is the Tax Rate?—the % of the tax
base that goes toward taxes
 Are there limits on taxes?
Yes
1. purpose must be “for the common
defense and general welfare
2. federal taxes must be the same in
every state
3. other rules limit the kinds of taxes
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Examples of Taxes
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Federal Income Tax
State Income Tax
State Sales Tax
Social Security Tax
Excise Tax—cigarette, liquor, gas, etc.
Property Tax— homes, cars, boats, etc.
Types of Taxes
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1. Proportional Taxes—This tax takes the
same % from individuals at all income levels.
2. Progressive Taxes—This tax takes a larger
% of income from a high-income person than
from a low-income person.
3. Regressive Taxes—This tax takes a larger %
of income from members of low-income groups
than from members of high income groups.
Types of Taxes
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Proportional—Ex. Bob earns $10,000/yr. And
Amy earns $100,000/year. State of CO. Has a
4.65% state tax.
Bob pays $465/yr. Amy pay $4650/year.
Progressive-- $24,000/year X 15% tax
bracket($3600)
$263,750/year X 39.6% tax bracket ($104,445).
Regressive—Dan earns $18,00/year; Angela earns
$24,000/year. Each buys a $20 CD and pays 8%
sales tax or $21.60 for CD. % wise, Dan pays higher
% of his salary.
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Collecting Taxes
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Largest Sources of Tax Revenue:
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Individual income taxes
Corporate income taxes
Social Security taxes
Property taxes
Sales taxes
Sources of Tax Revenue
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1. Individual Income Taxes
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Progressive income tax
Collected by the federal, state, local gov’ts.
Workers pay through payroll taxes
Employers deduct taxes from your checks
Sometimes known as “pay as you go” tax
Sources of Tax Revenue
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2. Corporate Income Taxes:
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Corporate profits are taxed by the gov’t
Many corporations pay reduced taxes due to
tax breaks which help promote plant
modernization.
Ex. New Walmart in Mesa is getting $84M in
tax incentives to build there.
Sources of Tax Revenue
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3. Social Security Taxes and Medicare: (FICA)
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Withheld from workers pay checks
Taxes are used to finance social welfare programs.
 Social Security payments to retirees, disabled,
survivors, etc.
 Medicare provides health care to older Americans
 Regardless of income, all workers pay the same 5.65
% of their income (up to 106,800) for social security
taxes.
Sources of Tax Revenue
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4. Property Taxes:
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Taxes apply to houses, land, factories.
Can also include personal property—ex.
Automobiles, boats, jewelry.
These taxes are used locally for such things
as education, police, fire protection.
Sources of Tax Revenue
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5. Sales Taxes:
Regressive tax assigned to certain goods and
services by state and local governments.
 Some states, medicine, food, and other
necessities are NOT taxed.
 Other Taxes and Revenues:
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 Excise
Tax—tax on manufacture, sale, or
consumption, of a particular good/service.
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Ex. Tobacco, liquor, gasoline, firearms, gambling
Other Taxes and Revenues
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Estate Tax—Tax placed on assets of a
person who has died. Generally, does not
apply unless assets greater than $600,000
Gift Tax—Tax placed on the transfer of
certain gifts, money. Gift giver does not
have to pay if not greater than $11,000/yr.
Customs Duty—Tax on imported goods.