Taxes and Government Spending

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• Taxes and Government Spending
• I. Taxes
• A. How Taxes Affect the Economy
• 1. Taxes increase the price of products which
  makes people less willing to buy. When sales
  fall, workers may lose their jobs. Example
  Oregon has no sales tax so many people cross the
  border to buy products.
• 2. Sin Tax- A tax that is raised for the purpose
  of getting rid of an undesirable behavior.
  Example Tobacco tax.

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• B. 3 Requirements of a Tax
• 1. Taxes must be fair. Is it fair that a couple
  making 200,000 pays a 39 tax on their income
  while a couple making 40,000 pays a 15 tax?
• 2. Taxes must be simple
• 3. Must be efficient
• C. The U.S. base their tax policies on two
  ideas.
• 1. Benefit Principle- Those who benefit from
  taxes should be the ones who pay. Example Your
  education is paid for mostly by the rich.
• 2. The Ability-to-Pay Principle- People who
  make more money have an easier time paying taxes
  than those with less income.

                
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• Types of Taxes
• Proportional Taxes- Everyone pays the same rate.
• Progressive Tax- The rich pay a higher
  percentage.
• Regressive Tax- The poor pay a higher percentage.

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As of January 18, 2001 the NATIONAL DEBT was
5,725,695,166,475.90

• II. Government Spending
• A. The Budget- The Federal budget (spending
  plan) is prepared by the president and approved
  by Congress.
• 1. Deficit- When the government spends more
  than it takes in. In 1998, the deficit was 120
  billion.
• 2. Surplus- When the government takes in more
  than what it spends.

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• B. Appropriations Bill- A bill in which the
  government sets aside money for various programs.
• 1. Social Security- Provides for the retirement
  of the elderly and unemployed.
• 2. Medicare- Health care for the elderly. Along
  with S.S. this makes up 35 of the budget.
• 3. Medicade, Food Stamps and other Social
  Programs- Health care and food for the poor.
  Makes up 17 of the budget.

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• 4. National Defense- Pays for the Army, Navy, Air
  Force, Marines, National Guard, and Coast Guard.
  Makes up 24 (Bush) 18 (under Clinton) of the
  budget.
• 5. School/Budget- Includes elementary,
  secondary and college (2/3rd of the school budget
  comes from the state, not the federal
  government.)
• 6. Transportation- Interstate Highways.
  Together with education they make up about 7 of
  the budget.
• 7. Law Enforcement- Federal courts, jails,etc.
  Makes up 2 of the budget.

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• E. How the U.S. Taxes
• 1. Basic Terms
• a. Internal Revenue Service (IRS)- The agency
  that receives and is in charge of tax payments.
• b. Payroll Withholding System- Employers will
  automatically take out Federal and State tax.

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• F. The Various Taxes
• 1. FICA- Social Security. The employee and
  employer both pay 7 of all wages for a total of
  14.
• 2. Medicare- Health Care for senior citizens.
• 3. Corporate Taxes- Corporations pay taxes as
  well as individuals.
• 4. Estate Tax- Ranges from 18 to 55.
• 5. Excise Taxes- Taxes on gasoline (about 40
  cents a gallon), liquor, telephone.
• 6. Customs Tax- Also known as tariff. This is a
  tax on imported goods.
• 7. Income Tax- Individuals are taxed on how
  much they make.

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• G. State Taxes
• 1. Sales Taxes- In California the rate differs
  from county to county, but is no less than 7.25.
• 2. Income Taxes- Although the amount is less
  than the Federal tax, individuals still pay taxes
  to the state.
• H. Local Taxes
• 1. Property Taxes- Any property you own is
  taxed at a little over 1 in California.
• 2. Utility Tax- Telephone, water, gas,
  electricity,etc.
• 3. Sales Tax

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• Question Should the U.S. government cut taxes
  or add more social programs?

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• III. Federal Deficits and Debt
• Deficits add to the debt. The Federal Debt this
  year was 5.9 trillion dollars.
• A. The Impact of the National Debt.
• 1. Public vs. Private Debt- Public debt is when
  the government owes itself. Most debt is public
  debt. Private debt is when individual people own
  government debt. About 10-15 of the debt is
  owned by foreigners.