taxes: required payment to local/state/national government
revenue: income received by government from taxes & non-tax sources
tax base: income/property/good/service subject to a tax
3 tax structures:
- proportional: constant % of income taken in tax as income rises
- progrressive: larger % of income taken in tax as income rises
- regressive: smallaer % of income taken in tax as income rises
individual income tax: tax on person's earnings
corporate income tax: tax on value of a company's profits
FICA: Federal Insurance Contributions Act
tax funds:
- social security: old age, survivors, disability insurance
- medicare: national health insurance program helps pay for healthcare for people 65+ or w certain disabilities
entitlement program: social welfare program that people are "entitled to" if meet requirements
fiscal policy: use of government spending & revenue collection to influence economy
balanced budget: revenues = spending
budget surplus: situation in which the government takes in more than it spends
budget deficit: situation in which the government spends more than it takes in
deficit: amount of money government borrows from 1 budget
vs.
debt: sum of all government borrowing up to that time
constitutional powers that give federal government the power to tax:
expressed- (article 1, section 8, clause 1) basis for federal tax
limits to taxing:
- taxation clause- can't bring money that goes to individual interests
- federal taxes same in every state
- can't tax church bc 1st amendment
- can't tax exports
characteristics of a good tax:
- simplicity: easily understood
- efficiency: government administrators collect taxes w/o spending too much time of money & taxPAYERS shouldn't spend too much time or money
- certainty: clear to taxpayer when it's due, how much, & how to pay
- equity: tax system= fair. no one bears too much/little burden
why federal government withholds taxes from each paycheck: how much you will owe in federal income taxes
how they determine over/underpaid:
- tax return: form used to file income taxes
- taxable income: income on which tax must be paid = total income minus exemptions & deductions
- personal exemptions: set amount subtracted from gross income for you/spouse/etc.
- deductions: variable amount can subtract from gross income
taxes affect our behavior as consumers:
tax incentive: use taxation to encourage/discourage certain behaviors
sin taxes: discourage from tobacco/alcohol/etc.
spending:
mandatory:
- spending on certain programs that are mandated/requited by existing laws
- use for interest payments on national debt
discretionary:
- spending category about which government planners can make choices
- defense
- education
the way state taxes are spent:
- education: every state has at least 1 public state university, supports tech., colleges, community
- public safety: police force enforces traffic laws, crime labs
- highways & transportation: resurfacing roads, repairing bridges, waterways, airports
- public welfare: hospitals, clinics, inspect water supplies & pollution
- arts & recreation: state forests/parks, nature reserves, museums, art & music programs
- administration: state government executive branch, legislature, court system, pay state workers, maintenance crews in parks, government & state court judges
- collect revenue: limits on state tax: constitution limits, can't tax imports/exports, federal property, nonprofit organizations, etc.
- sales taxes: tax on goods/services, sin taxes, tax ranges depending on state
- state income taxes: type of tax varies by state
- corporate income tax: from companies, type of tax varies
- other state taxes: licensing fees, transfer taxes (documents, certificates, transgerred & recorded), severance taxes (companies take resources from state), property (real estate, personal property)
local government: responsible for funding/running:
- public school system
- law enforcement
- public facilities
- parks
- public health
- transportation
- elections
- record keeping
- social services
funding: property taxes, sales, excise, income taxes
