Chapter 12 Paying for Government

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Chapter 12Paying for Government

• Section 1 Raising Money
• Section 2 Types of Taxes
• Section 3 Managing the Countrys Money

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Section 1 Raising Money

• The Main Idea
• Each year the local, state, and federal
  government provide Americans with services such
  as police, schools, highway construction, and
  defense. These services cost huge amounts of
  money. The government pays for these services
  with taxes collected from citizens.
• Reading Focus
• Why is the cost of government so high?
• What guidelines do governments use when taxing
  citizens?
• Other than taxes, what are two ways to pay for
  government?

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The cost of government is high due to
Section 1 Raising Money

• A population of more than 281 million people
• The rising cost of living
• More government programs and services like
  defense spending and payments to the elderly,
  disabled, or impoverished
• The national debt

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Deciding how to spend the governments money
Section 1 Raising Money

• Officials establish governments priorities.
• Priority is given based on urgency and need.
• Debate over the countrys priorities is common.

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Principles of taxation
Section 1 Raising Money

• Ability to paybased on earned incomes poor do
  not pay income tax
• Equal applicationtax applied at the same rate
  for similar taxable items
• Scheduled paymenttaxes due by April 15
• Fees, fines, and payments for special services
  also raise government funds.

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SECTION 1
Question What guidelines do governments use
when taxing citizens?
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Section 2 Types of Taxes

• The Main Idea
• Taxes are the main source of revenue for the
  local, state, and federal governments. The types
  of taxes each level of government uses to raise
  money vary.
• Reading Focus
• What are the two main kinds of income taxes?
• What are the other major types of taxes?

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Different types of taxes
Section 2 Types of Taxes

• Individual income taxthe largest source of tax
  revenue most citizens pay federal, state, and
  local income taxes
• Sales and excise taxsales taxes are collected by
  state or local governments excise taxes (on
  luxury items) are collected by the federal
  government
• Property taxeschief income for most local
  governments funds public education

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Different types of taxes (continued)
Section 2 Types of Taxes

• Estate, inheritance, and gift taxestates of the
  deceased, value of inheritances, and monetary
  gifts above 10,000 are taxable by the federal
  government
• Import taxtariffs on imported products used to
  regulate trade

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Progressive and Regressive Taxes
Section 2 Types of Taxes

• Progressive taxes take a larger percentage of
  income from high-income groups. Example
  individual income tax
• Regressive taxes take a larger percentage of
  income from low-income groups. Example sales
  taxes

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Tariffs and the U.S. Economy
Section 2 Types of Taxes

• Tariffs are taxes placed on goods imported from
  foreign countries.
• Tariffs can help the U.S. economy by
• Regulating trade
• Retaliating against tariffs placed by foreign
  countries on U.S. goods
• Protecting American industries against foreign
  competition
• Raising prices on foreign goods

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SECTION 2
Question What are the differences between
progressive and regressive taxes?
takes a larger percentage of income from
lower-income groups.
PROGRESSIVE TAX
takes a larger percentage of income from
higher-income groups.
REGRESSIVE TAX
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Section 3 Managing the Countrys Money

• The Main Idea
• The federal, state and local governments collect
  and spend many billions of dollars each year.
  Each level of government has systems to manage
  public funds.
• Reading Focus
• How do governments collect public money?
• What steps are involved in spending public money?
• How do governments account for your money?

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How governments collect public money
Section 3 Managing the Countrys Money

• Internal Revenue Servicecollects federal taxes
• U.S. Customs Servicecollects taxes on imported
  goods
• State and local governments collect taxes through
  their own collection agencies.

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Steps in creating the federal budget
Section 3 Managing the Countrys Money

• Office of Management and Budget and the president
  prepare the budget.
• The prepared budget is published and sent to
  Congress for study.
• Congress debates the budget and makes changes.
• Both houses must approve the budget.
• The budget is passed with 13 appropriations
  bills.
• Bills are sent to the president for approval or
  veto.

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The National Debt
Section 3 Managing the Countrys Money

• 19701997The government spent more than it
  collected.
• Money was borrowed to make up the difference.
• Interest on the borrowed money increases the
  debt.
• Government bonds used to borrow money are being
  bought by foreign investors.
• Clinton plan for balanced budget in 2002 was
  thwarted by recession and terrorism.

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SECTION 3
Question How do governments collect public money?
Federal collection agency
Internal Revenue Service
Role of the collection agency
collects individual income taxes, corporate
income taxes, Social Security taxes, excise
taxes, estate taxes, and gift taxes
State and local collection agencies
collects state income and inheritance taxes as
well as local property taxes
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Chapter 12 Wrap-Up
1. Identify six reasons for the high cost of
government. 2. Identify and explain the
principles the government uses to try to make
taxation fair. 3. Why must governments borrow
money? How do they borrow money? 4. How is
individual income tax calculated, and how do
citizens pay individual income taxes? 5. What is
the difference between a progressive tax and a
regressive tax, and what is an example of
each? 6. What is the difference between a surplus
and a deficit? 7. What is the national debt, and
how might it be harmful to the country?