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Economics 101909 http:students'resa'netmilewski

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Title: Economics 101909 http:students'resa'netmilewski


1
Economics 10/19/09 http//students.resa.net/milew
ski
  • OBJECTIVE Demonstration of Chapter6 and begin
    examination of taxes.
  • I. Administrative Stuff
  • -attendance
  • -distribution of test
  • II. Chapter6 Test
  • III. Journal 21 pt.A
  • -Examine Economics at a Glance p.225
  • -Answer question 1 p.225
  • IV. Journal 21 pt.B
  • -notes on taxes
  • NOTICE Journals 13-22 Due Tomorrow!

2
Chapter9
  • We will cover sections (1-3)
  • Section4 can take a long walk off a short pier.
  • Journals 13-22 Due Tomorrow!

3
Why taxes?
  • An enormous amount of money is required to run
    the federal, state, and local governments of the
    United States.
  • Total revenue collections by all levels of
    government have grown dramatically over the
    years.
  • Even when adjusted for inflation and population
    growth, these revenues increased by nearly 800
    since 1940.

4
Growth of Taxes
5
Economic Impact of Taxes
  • Taxes and other govt revenues influence the
    economy.
  • It affects resource allocation, consumer
    behavior, and the nations productivity and
    growth.
  • The burden of a tax does not always fall on the
    party being taxed, because some of the tax can be
    transferred to others.

6
Types of Taxes
7
Taxing Suppliers
  • A tax placed on a good or service at the factory
    raises the cost of production, which shifts the
    supply curve to the left.
  • If demand remains unchanged, the equilibrium
    price of the product goes up.
  • People react to the higher price in a predictable
    mannerthey buy less.

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2469.gif
8
Corporate Tax Rates
9
Criteria for Effective Taxes
  • Some taxes will always be needed, so we want to
    make them as effective as possible.
  • To do so, taxes must meet criteria they must be
    equitable, simple, and efficient.

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10
Quintiles
  • Minimum household incomeLowest Quintile
    0Second Quintile 17,900Middle Quintile
    30,500Fourth Quintile 45,200Highest Quintile
    67,400Top 1 307,500

11
Simple v. Complex Taxes
  • Individual income taxthe tax on peoples
    earningsis a prime example of a complex tax.
  • Sales taxa general tax levied on most consumer
    purchasesis much simpler.

12
Sin Tax
  • Often taxes are used to encourage or discourage
    certain types of activities.
  • Sin taxes are designed to raise revenue and
    reduce consumption of a socially undesirable
    product.

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13
Economics 10/20/09 http//students.resa.net/milew
ski
  • OBJECTIVE Examine the main sources of Federal
    Governmental Revenue.
  • I. Journal 22 pt.A
  • -Read Profiles in Economics p.237
  • -Answer questions (1-2) p.237
  • II. Quiz13
  • III. Return of Chapter6 Test
  • IV. Journal 22 pt.B
  • -notes on federal taxes
  • V. Econ U.S.A. episode6
  • -Fiscal Policy
  • NOTICE Journals 13-22 Due!!

14
Federal Taxes
  • The federal government collects taxes from a
    number of sources.
  • Individual Income Taxes
  • Social Security Taxes
  • Corporate Income Taxes
  • Misc. Other Revenues

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15
Individual Income Taxes
  • In 1913 the 16th Amendment to the U.S.
    Constitution was ratified, allowing Congress to
    levy an income tax
  • Since then, the federal govt has relied heavily
    on the individual income taxthe tax on peoples
    earningsto finance its operations
  • The federal government collected about 48 of its
    total revenue from taxes on peoples earnings

16
Federal Government Revenue by Source
17
Payroll the IRS
  • In most cases, the individual income tax is paid
    over time through a payroll withholding system
  • This is a system that requires an employer to
    automatically deduct income taxes from an
    employees paycheck and send it directly to the
    government
  • The agency that receives the tax payment is the
    Internal Revenue Service (IRS), the branch of the
    U.S. Treasury Department in charge of collecting
    taxes

18
April 15th
  • After the close of the tax year on December 31,
    and before April 15 of the following year, the
    employee files a tax return.
  • This annual report to the IRS summarizes total
    income, deductions, and the taxes withheld by
    employers.
  • FYI-People who are self-employed are required to
    send quarterly estimates of their taxes to the
    Internal Revenue Service.

19
Income Tax is Progressive
20
Single Individual Taxes
21
Economics 10/21/09 http//students.resa.net/milew
ski
  • OBJECTIVE Examine the main sources of Federal
    Governmental Revenue.
  • I. Journal 23 pt.A
  • -Read Business Week Newsclip p.243
  • -Answer questions (1-2) p.243
  • II. Journal 23 pt.B
  • -notes on federal taxes
  • III. Math Practice

22
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23
FICA
  • FICA - Federal Insurance Contributions Act tax
    levied on both employers and employees to pay for
    Social Security and Medicare.
  • Medicare - federal health-care program available
    to all senior citizens, regardless of income
  • Employees and employers share equally in paying
    the tax for Social Security and Medicare
  • Social Security tax is 13. You pay 6.5 and
    your employer pays 6.5
  • payroll taxes - taxes that are deducted from your
    paycheck

24
Social Security Medicare
  • Since the Social Security tax is capped, it is
    proportional up to 76,200 and regressive
    thereafter
  • More than 30 million senior citizens participate
    in Medicare.
  • The Medicare component of FICA is taxed at a flat
    rate of 1.45 percent with no income cap.

25
Excise Taxes
  • excise tax a tax on the manufacture or sale of
    selected items, such as gasoline and liquoris
    the fourth largest source of federal government
    revenue
  • In 1991 Congress expanded the excise tax to
    include certain luxury goods
  • An economic product is called a luxury good (or
    service) if the demand for the good rises faster
    than income when income grows

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26
Luxury Tax
  • At first, the 19 luxury tax was indexed to keep
    up with inflation and was applied to many goods
  • The tax was unpopular, however, so boats,
    aircraft, jewelry, and furs were dropped in 1993
  • Later, Congress decided to phase out the luxury
    tax by the year 2002

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27
Estate taxes
  • Estate tax - the tax the government levies on the
    transfer of property when a person dies
  • Estate taxes can range from 18 to 55 percent of
    the value of the estate
  • The estate tax and the gift tax are progressive
    taxesthe larger the estate or gift, the higher
    the tax rate

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28
Economics 10/22/09 http//students.resa.net/milew
ski
  • OBJECTIVE Learn how to write.
  • I. Administrative Stuff
  • -attendance
  • II. School wide writing project
  • -Directions vary by hour.

29
Economics 10/23/09 http//students.resa.net/milew
ski
  • OBJECTIVE Examine the main sources of State and
    Local Governmental Revenue.
  • I. Journal 24 pt.A
  • -Examine Figure 9.8 p.240
  • -Answer the caption question p.240
  • -Examine Figure 9.9 p.241
  • -Answer the caption question on p.241
  • II. Quiz 14
  • III. Journal 24 pt.B
  • -notes on state local taxes
  • IV. Mindjogger
  • -video quiz on Chapter9

30
Sources of State Local Revenue
31
Intergovernmental Revenue
  • The largest source of state revenue is the
    category called intergovernmental revenue
  • These are funds collected by one level of
    government that are distributed to another level
    of government for expenditures
  • They represent nearly one-quarter of all state
    revenues

32
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33
Paycheck
34
Sources of State Local Revenue
35
Budget of the State of Michigan
  • The size of Michigan's overall budget is 42.4
    billion (fiscal year 2007).

36
Michigan Budget 2007
http//www.michigan.gov/budget/0,1607,7-157-40794-
139068--F,00.html
37
Sales Tax
  • The sales tax is a general tax levied on consumer
    purchases of nearly all products
  • The sales tax is the second largest source of
    revenue for states, accounting for 21.7 percent
    of total revenues collected
  • Many states levy taxes, fees, or other
    assessments on their employees to cover the cost
    of state retirement funds and pension plans

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38
Remaining Revenues
  • The remaining revenues that state governments
    collect are interest earnings on surplus funds,
    tuition collected from state-owned schools,
    corporate income taxes, and hospital fees
  • For years, New Hampshire took pride in the fact
    that it had neither a sales tax nor an income tax
  • The same is true for Alaska, Delaware, Montana,
    and Oregonthe other four states without a
    general sales tax

39
Public Lotteries
  • The choice of tax is something that most states
    feel strongly about
  • In the end, the choices that states face are like
    the choices individuals faceand we already know
    that there is no such thing as a free lunch
  • Nearly three-fourths of the states run public
    lotteries to raise revenue

40
Property tax
  • The second largest source of revenue for local
    governments is the property tax
  • Property tax is a tax on tangible and intangible
    possessions such as real estate, buildings,
    furniture, automobiles, farm animals, stocks,
    bonds, and bank accounts
  • The property tax that raises the most revenue is
    the tax on real estate

41
Personal Property
  • Taxes on other personal property are seldom
    collected because of the problem of valuation
  • Instead, most communities find it more efficient
    to hire one or more tax assessorsthe people who
    assign value to property for tax purposesto
    assess the value of a few big-ticket items like
    buildings

42
  • The third largest source of local revenue is
    derived from the earnings of public utilities and
    state-owned liquor stores
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