You are on page 1of 26

Warm-Up 4/25/18

What is our GDP? What is our national debt?

What do we spend most of our money on?
Unit 3 Section 2
•A required payment to local, state, national gov.
•The primary way gov. collects money.
•Gives gov. money it needs to operate.
•The first power granted to Legis. Branch is the power to tax.
Taxation Limitations:
•A tax can’t bring in money to individual interests.
•Must be for the common defense and general welfare of the citizens.
•Fed. taxes must be the same for all states
•Religious organizations can’t be taxed.
•Income gov. receives from taxes and other non-taxed sources
•Helps gov. pay for public services.
•National def., highways, education.
Tax Structures and Bases
•Progressive Tax: Income tax increases as income goes up. The more
you make, the more you pay.
Tax Structures and Bases
•Proportional Tax: Tax rate stays the same for everyone, no matter
the income. Everyone pays the same percentage.
Tax Structures and Bases
•Regressive Tax: As income goes up, percentage of income tax paid
goes down. The more you make, the less you pay.
Checking for Understanding
1. What are taxes and who has the power to tax?
2. How are people taxed under a progressive tax system?
3. Revenue from taxes helps pay for what?
4. Taxes must be used for the common defense of the people and
what else?
Tax Structures and Bases
•Tax Base: Income, property, good, or service that is subject to a tax.
-Individual Income Tax: Based on personal earnings
-Corporate Income Tax: Based on a company’s earnings
-Property Tax: Based on real estate and other property
-Sales Tax: Based on the goods and services sold
Individual Income Tax
•The U.S. uses a “pay-as-you-earn” progressive structure.
•Individuals pay income tax throughout the year as they earn.
-Payments employers take from earnings.
-Employer sends withheld money to the federal gov.
-Based on how much is estimated you might earn
Individual Income Tax
•Tax Return: Form used to file income taxes
-On the form you declare your income to gov.
-You figure out how much of your income is taxable
Individual Income Tax
•Forms 1040, 1040A, 1040EZ
-1040: most complex, but allows for more deductions
-1040A: less complex, allows for some deductions
-1040EZ: least complex, no itemized deductions
Individual Income Tax
•Taxable Income: Gross (total) income minus deductions (income
•The tax return determines if you’ve paid too much in taxes or not
•Too much=refund, Not enough=send payment
Corporate Income Tax
•Corporations also pay taxes on their taxable income.
•Corp. can make deductions from their taxable income (such as
employee healthcare)
•Corps. also pay on a progressive tax structure
Corporate Income Tax
Checking for Understanding
1. What is a tax base?
2. The U.S. uses what kind of structure for income tax?
3. Which tax return form is the simplest one?
4. What do you get if you’ve paid too much in taxes?
The Federal Budget
•Written document estimating gov.’s revenue.
•Authorizes spending for the coming year.
•The gov. prepares a new budget for each fiscal year.
•Fiscal Year: 12 month period used for budget purposes.
The Federal Budget
Balancing the Budget
•When gov. revenue (earnings) equals expenditures (spending) the
budget is balanced.
•Budget Surplus: Revenue > expenditures.
•Budget Deficit: Expenditures > revenue.
•Gov. spends more w/o increasing revenue-deficit
•Revenue increases w/o increase in expenditures-surplus
Balancing the Budget
•What can help fix a deficit?
-Print more money: Not used often. More money in circulation can
lead to the dollar losing it’s value.
-Borrow Money: The gov. can sell bonds (a type of loan) that
consumers and businesses can buy.
Controlling the Deficit
•How can gov. prevent deficits?
-Cut expenditures: reduce the amount the gov. spends (social
-Increase taxes: raise amount people pay in taxes.
•Sometimes both strategies are used, sometimes one is used over the
Entitlement Programs
•Gov. program that guarantees certain benefits
•Benefits go to certain segment of population
•Social Security, Medicare, Unemployment
Social Security
•Federal insurance program
•Provides benefits to retired people
•Also to those that are unemployed or retired
•Federal insurance program for:
-People 65 or older
-Young people with disabilities
Checking for Understanding
1. Social Security provides benefits to which people?
2. Medicare is a federal insurance program for who?
3. What is one way the gov. can prevent deficits?
4. What does it mean when the federal budget is balanced?