chapter 9 sources of government revenue section 1 sin tax a relatively high tax raise revenue –...
TRANSCRIPT
![Page 1: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/1.jpg)
Chapter 9 Sources of Government Revenue Section 1
• Sin tax• a relatively high tax• Raise revenue– Used to fund treatment and prevention
• Discourage an undesirable product– Liquor– Tobacco
![Page 2: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/2.jpg)
• Incidence of a tax• the final burden of the tax
![Page 3: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/3.jpg)
Tax loopholes
• exceptions or oversights in the tax law that allow select individuals and businesses to avoid paying taxes.
• Raise a question of fairness.
![Page 4: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/4.jpg)
Individual income tax
• tax on a person annual earnings (salary, wages, tips, etc.)
• A complex tax• Many rules apply to – how much is taxable– How much is deductible
![Page 5: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/5.jpg)
Marginal and Average Taxes Worksheet
• Marginal tax rate- the rate at which the last dollar of income is taxed. (Not a flat rate across entire income.)
• Average Tax- average tax burden across entire income.• Personal Exemption- a dollar amount provided by the Federal
Government that is deducted from income for yourself and each dependent. Government provides deductions to help the economy.
• Examples– Yourself– Child (each)– Mortgage
![Page 6: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/6.jpg)
Sales tax
• levied on most consumer products• Simple tax– Paid on time of purchase– Uniform for all products• CA = 7.5%
• Exemptions include:– Basic foods (not processed)– Child care– medicine
![Page 7: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/7.jpg)
Benefit principles of taxation
• those who benefit from government goods and services should pay in proportion to the amount of benefits they receive
• A guiding principle of taxation.– Ex: Gas tax paid only by users at gas stations• Pays for interests of users of gasoline• Highways
![Page 8: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/8.jpg)
Ability-to-pay principle of taxation
• the belief that people should be taxed according to their ability to pay.
• Recognizes– That society cannot measure the benefits derived
from government spending.– The assumption is that people with higher
incomes suffer less discomfort paying taxes than people with lower incomes.
![Page 9: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/9.jpg)
Proportional tax
• imposes the same percentage of taxation on everyone, regardless of income.– A 20% tax would mean• $10,000 income, tax would be $2000.• $100,000 income, tax would be $20,000
– Examples• Some states have a proportional income tax.• Tithe- a payment of 10% of your income to a religious
organization.
![Page 10: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/10.jpg)
Average tax rate
• total taxable income divided by the total income
• Constant, regardless of income– If income increases, the percentage stays the
same.
![Page 11: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/11.jpg)
Progressive tax• imposes a tax with a higher rate of taxation on
person with higher income.• Marginal tax rate• Applies a levy to the next dollar of taxable income• The rate increases as the amount of taxable income
increases– $10,000 income, tax is $1000– $20,000 income, tax is $2000– $100,000 income, tax is $20,000– Points of percentage increase are called “brackets”
![Page 12: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/12.jpg)
Regressive tax
• A tax that imposes a higher percentage rate of taxation on low incomes than on high incomes.
• Sales tax is harder on lower income people than higher income people.
• Examples:– Sin Taxes– Sales Tax– Social Security (caps out at higher levels of income)
![Page 13: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/13.jpg)
Section 2:
• Payroll withholding system• requires the employer to automatically deduct
income taxes from an employee’s paycheck.– W-2 form starts the process– W-2 statement informs employee • total annual gross income, • net income, • taxes withheld.
![Page 14: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/14.jpg)
Internal Revenue Service (IRS)
• Branch of the US government that collects taxes.
• Part of the Department of the Treasury
![Page 15: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/15.jpg)
Tax return
• an annual report filed by the employee to the IRS– Total income– Deductions– Taxes withheld by employers
• Must be submitted by April 15th if employee owes any more taxes.– If employer paid more taxes, the employee will
receive a payment from the government.
![Page 16: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/16.jpg)
Indexing
• an upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation.
![Page 17: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/17.jpg)
FICA• Federal Insurance Contributions Act– Tax levied on both employers and employees to pay for
Social Security and • Medicare• A federal health-care program available to all senior
citizens– Regardless of paying the tax for Social Security and
Medicare• Payroll tax– Revenue deducted from a person’s paycheck by the
government.• FICA
![Page 18: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/18.jpg)
Corporate tax
• a corporation pays an income tax as if it were an individual.
• Based on profits• Brackets as of printing were:– 15% up to $50,000– 25% $50,001 to $75,000– 34% $75,001 to $18.3 million – 35% $18.3 million and over.
![Page 19: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/19.jpg)
Excise tax
• A tax on the manufacture or sale of selected items– Gasoline– Liquor– Telephone service– Tires– Legal betting– Coal– Luxury goods
• A regressive tax as lower-income people pay more of their income than higher income people.
![Page 20: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/20.jpg)
Luxury good
• good or service where demand for the good rises faster than income, when income grows.– Vehicles over $40,000– Large pleasure boats– Private planes– Jewelry– Furs
• Phased out by Congress in 2002
![Page 21: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/21.jpg)
Estate tax
• tax levied on the transfer of property when a person dies.
• Usually on property OVER $2 million.• Aka, “death tax”
![Page 22: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/22.jpg)
Gift tax
• tax on large amount of money or wealth “donated” by a person to others to avoid paying larger income taxes.
![Page 23: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/23.jpg)
Customs duty
• tax on imported goods or goods brought in by travelers from other countries.– Automobiles– Jewelry– Metals
• Until 1913, the main source of revenue of the United States– Replaced by income tax that year.
![Page 24: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/24.jpg)
User fees
• Charges for the use of a good or service.• Ex: National park fees
![Page 25: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/25.jpg)
Assessments: Checking for Understanding
• 1 List the ways that taxes influence the economy.
• Resource allocation• Behavior adjustment• Productivity and growth• Incidence of a tax
![Page 26: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/26.jpg)
• 3 Describe the economic impact of taxes• They affect – resource allocation– Consumer behavior– The nation’s productivity and growth
![Page 27: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/27.jpg)
• 4 List three criteria to evaluate taxes.• Equity• Simplicity • Efficiency
![Page 28: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/28.jpg)
• 5 The two main principles of taxation. (just list them)
• Benefit principle• Ability-to-pay principle
![Page 29: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/29.jpg)
• 6 Explain the characteristics of proportional, progressive, and regressive taxes.
• Proportional:– Same percentage rate of taxation on everyone
• Progressive:– Imposes higher percentage rate on person with higher
incomes
• Regressive:– Imposes a higher percentage rate on lower incomes as
compared to high incomes.
![Page 30: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/30.jpg)
Assessments: Checking for Understanding
• 1 List the federal government’s most important revenue sources.
• Individual income taxes• FICA taxes• Corporate income taxes
![Page 31: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/31.jpg)
• 3 Describe the progressive nature of the individual income tax.
• It imposes a higher percentage rate of taxation on persons with higher income.
![Page 32: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/32.jpg)
• 4 Identify the main marginal tax brackets in the corporate income tax structure .
• 15%• 25%• 34%• 35%
![Page 33: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/33.jpg)
• 5 Describe the other sources of government revenue.
• Excise taxes• Estate taxes• Gift taxes• Customs duties• User fees for the use of a good or service.
![Page 34: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/34.jpg)
image, p. 224
• What information does the graph show for the period 1980 to 2000?
• Total government receipts grew from 500% of the 1940 level to over 700%
![Page 35: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/35.jpg)
Image, p. 225
• Who is likely to bear the greater burden- the producer or consumer- if a tax is placed on medicine?
• The demand for medicine is generally inelastic• The consumer will bear the greater burden of
a tax on medicine.
![Page 36: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/36.jpg)
images, p. 227
• According to the ability-to-pay principle, how is the amount each person has to pay determined?
• The amount each pays depends on how much income each earns
![Page 37: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/37.jpg)
images, p. 228
• Under which type of tax do individuals with lower incomes pay a smaller percentage than do those with higher incomes?
• Progressive tax
![Page 38: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/38.jpg)
image, p. 232
• How did these occurrences change the composition of government revenues between 1990 and 2004?
• Borrowing decreased and taxes increased
![Page 39: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/39.jpg)
Image, p. 233
• How much in taxes would an individual with $40,000 of taxable income pay?
• $6,810.00• Solution:• $3,910 + .25 ($40,000 – $28,400) =• $3,910 + $2,900 = $6,810
![Page 40: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/40.jpg)
image, p. 234
• Is the FICA tax a progressive or regressive tax? Explain your reasoning.
• A regressive tax• Because the Social Security portion of FICA is
capped at a certain income level– The higher the income, the lower the FICA tax.
![Page 41: Chapter 9 Sources of Government Revenue Section 1 Sin tax a relatively high tax Raise revenue – Used to fund treatment and prevention Discourage an undesirable](https://reader035.vdocuments.us/reader035/viewer/2022062515/56649f455503460f94c6700c/html5/thumbnails/41.jpg)
image, p. 235
• What are luxury Goods?• Goods or services for which the demand rises
faster than income when income grows.