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Taxing and Spending Financing the Government Federal Revenues Taxes Income Tax Individual Corporate Tax exempt groups Social 3% 4% Individual Income Tax 14% Insurance Taxes Excise Taxes 33% Customs Duties Estate & Gift Taxes IRS (Internal Revenue Service) 46% Social Insurance taxes & Retirement Corporate income tax Excise taxes Other Taxes Understanding the Income Tax Taxable income: Deductions: Exemptions:. Withholding: Taxable income: Dependent: Tax rate: Differences in taxes Flat Tax Regressive Tax Progressive Tax Tax after 2 exemptions Progressive tax Income Tax rate Tax Amount remaining 12,000 10% 1,200 10,800 30,000 15% 4,500 25,500 60,000 18% 10,800 49,500 200,000 25% 50,000 150,00 1,000,000 28% 280,000 720,000 0 2,100 7,920 46,000 275,520 Total tax collected: $346,500 Flat tax Income Tax rate Tax Amount remaining 12,000 18% 2,160 9,840 30,000 18% 5,400 24,600 60,000 18% 10,800 49,500 200,000 18% 36,000 164,000 1,000,000 18% 180,000 820,000 No Exemptions Total tax collected: $234,360 Regressive Tax Only income that is spent is taxed Income Tax rate (sales tax) Amount spent Tax Amount remaining Amount after tax & spending 12,000 20% 10,800 2,160 9,840 -960 30,000 20% 25,000 5,000 25,000 0 60,000 20% 50,000 10,000 50,000 0 200,000 20% 100,000 20,000 180,000 80,000 1,000,000 20% 500,000 100,000 900,000 400,000 Total Tax collected: 137,160. Payroll Deductions in your pay check Hourly wage: $15.00 Weekly Monthly Annual Hours worked 40 173.33 2,080 Gross Income $600.00 $2,600.00 $31,200.00 Payroll Deductions Retirement Contribution: 10 % $60.00 $260.00 $3,120.00 Taxable Income $540.00 $2,340.00 $28,080.00 Income Tax Withholding: 17.5% $94.00 $409.50 $4914.00 Social Security: 4.2% $22.68 $98.28 $1179.36 Medicare: 1.45% $7.83 $33.93 $407.16 Health Insurance $20.00 $86.67 $1040.00 Net Income $394.99 $1,711.62 $20,539.38 Excise Taxes Spending Other spending 13% National Defense 20% Net interest on debt 9% Social Security 21% Medicare, Health, and Income Security 37% National Defense Income Tax (w/o Social Security & Medicare) What do taxes pay for? Healthcare Job and family Security Education and Job Training Veterans Benefits Natural Resources, Energy, and Environment International Affairs Science, Space, Technology Immigration, Law Enforcement, and Justice Agriculture Community and Area Development Response to Natural Disasters Additional Government Programs Net Interest Preparing the Federal Budget Fiscal Year Budget and Accounting Act of 1921 OMB CEA Preliminary Budget Agencies Review Presidential Review Sent to Congress Goes to Committee Congressional Budget Act of 1974 CBO Joint Budget Committee (Standing) Revised Voted on Sent to President signed or vetoed Appropriations Budget Bills Revenues Budget Bills (must begin in House of Representatives) Fiscal Policy vs. Monetary Policy Shutting Down the Government The National Debt Deficit v. Debt Interest Other Important Budget Concepts you must know! Uncontrollables Discretionary Spending Entitlements Fiscal Policy Monetary Policy GDP GNP Federal Reserve
