Transcript Taxes Notes

Taxes
“There are only two guarantees in life: Death and Taxes”
Taxes
 A tax is a required payment to a local, state,
or national government
 Constitutionally, the federal government
cannot tax for the purpose of using money for
an individual interest. 2nd the federal
government must tax the same amount in
each state.
 tax base: is the amount of money value that
can be taxed.
Two tax philosophies
 Benefits received principle: the tax should be
proportional to the use you get from the tax.
i.e. a gas tax. The more you use the road, the
more taxes you pay. Is a cigarette tax fair?

 The ability-to-pay principle: people who earn
more money should pay more taxes because
they have more money and they can afford to
pay
Types of taxes
 Sales tax
 Income tax (federal and state)
 Corporate Income Taxes
 Social Security, Medicare,
and Unemployment Taxes
 Excise Taxes
 Estate Taxes
 Gift Taxes
 Import Taxes
 Taxes on imported goods are called tariffs.
Three different tax structures:
1. Proportional tax: a constant percentage is
paid as income goes up
2. progressive tax: a tax where the percentage
of income paid in taxes increases as income
increases
3. Regressive tax: a tax where the percentage
of income paid decreases as income
increases
Where do the taxes go?
 Federal government ---- money comes from
income taxes  goes to social security,
national defense
 State government ---- money comes from
income and sales tax  goes to education,
roads, and police
 Local government ---- money comes from
property taxes  goes to education, police,
and parks
Filing a Tax Return
 A tax return is a form on which you declare your
income to the government and determine your
taxable income.
 Taxable income is a person’s total (or gross)
income minus exemptions and deductions.
Exemptions are set
amounts that you subtract
from your gross income
for yourself, your spouse,
and any dependents.
Deductions are variable amounts
that you can subtract from your
gross income.