Download Unit IV Taxes

Unit IV) Taxes
What is fair?
What are taxes?
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Tax – a charge to people and businesses to pay for
the operation of government, who in turn provides
goods and services.
Public Goods and Services – something that can’t be
kept from those who don’t pay for it, and something
that can be used by a person without reducing the
amount to others.
Ex: Roads, Education (#1 for states), Parks, National
Defense, interest on national debt!!
Voluntary Compliance – a system that relies on each
person to report their income freely and voluntarily,
figure their tax, and return on time.
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Personal Income Tax – based on the amount
of “taxable” income people get annually. (Lots
of wiggle room here though)
Tax Liability – the amount of tax $ you are
responsible for/must be paid.
Withholding - $ that employers take out of
employees paychecks. (before they are
cashed). It is deposited to state/fed.
Mandated: FICA (Social Security), State,
Federal, Medicare, City (NYC),
County? Alimony? Child Support?
Voluntary: Credit Union, Investments, Union
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W-4 Form – allows employers determine how
much to withhold from paychecks. Ex. 0,1,2.
Note – the higher you claim, the less taken out
W-2 Form – sent by employers at end of
calendar year (January) for tax filing
purposes…states total income, and taxes paid
the previous year.
II) Rights and Responsibilities
A)
Rights:
B)
1) Right to privacy of all your tax information. (one
unofficial exception to rule)
2) Right to appeal an IRS judgment. It doesn’t
mean you’ll win though!
Responsibilities:
1) File a return by April 15th that includes:
a) Copy of W-2 (for verification of truth)
b) Proof of all other income/investments
c) Any Exemptions/Deductions – kids or tuition
d) Calculation of your return (refund or tax)
2) Obtain all forms – sent by the government, or
obtained at banks, post offices, libraries… or
ONLINE! (EFILE)
Note – electronic filing has become the
standard method.
3) Be complete and honest
4) Sign/Mail – Apr. 15th Deadline (usually)
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Efile is now the most common way in
which file their returns (over 75%)
Simplicity is now the name of the game
with programs like TurboTax
GET
FORMS
(online,
post office,
library)
COMPLETE
FORMS
(on own, or
with
professional)
MAIL
By April 15th
in most cases
IRS
CHECKS
MATH
IRS
RECHECKS
MATH
RETURN
IS
CLEARED
IRS AUDIT:
Taxpayers meet,
provide
documents,
receipts, etc.
IRS Proposes
an adjustment
PAY
APPEAL
EFILE
OR
IV) Limits/Requirements of 1040EZ
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Independents must file if you earned $10,000
and paid state/federal taxes. (Single or
Married)
Dependents must file a return if you earned
more than $6,100 “under the table”.
Use the 1040EZ if:
1) Made less than $100,000
2) Have no kids
3) Earned less than $1,500 interest income
(from investments, cd’s)
4) You have no IRA account
** Other forms include IT200, 1040, 1040A, 1040X
V) General Tax Types
Transaction Taxes – on economic sales.
Can be set %, or a set amount.
Ex. 1) Retail Sales (8.75% Oneida) (8.25% Herk)
2) Excise (Sin) Taxes on cigs, alcohol, fat?
3) Excise taxes on hotel/bed, gasoline
Revenue ($) used to support major expenses like
schools, Medicaid, highways
B)
Income Taxes – on earned/unearned. Began
at 1% and has evolved to roughly 30% after
state, federal, social, Medicare.
C) Property Taxes – on assessed items, including
car, house, land, boats.
Revenue used toward local services: police, fire,
education, water, libraries, water sanitation
A)
Added Taxes – Lottery Income
VI) Tax Systems
A)
B)
Progressive Tax – a tax that takes a larger %
of income from the rich than the poor.
(Brackets used in the U.S.) (See on next slide)
Ex. $100,000 – 20% (20,000) = $80,000
$ 20,000 - 10% (2,000) = $18,000
Regressive Tax – a tax that takes a higher %
of income from the poor than from the rich
(usually a set amount of $). Feudal Times.
Ex.
$100,000 - $4,000 = $96,000 (4%)
$20,000 - $4,000 = $16,000 (20%)
Recent Tax Brackets
Proportional (Flat) Tax – a tax that takes the
same % of income from all income groups.
Ex. $100,000 – 10% ($10,000)= $90,000
$ 20,000 - 10% ($2,000) = $18,000
This may look the best, but it may not raise
enough money.
Today the U.S. uses a mix of Proportional and
Progressive taxes. In the end: Vertical
Equity supports “unequals taxed unequally.”
c)
Tax Credits – deductions from taxable
income responsibilities.
Examples include:
Kids
Mortgage Interest
College Loans/Tuition Fees
Home Improvements/Star Type Programs
Business Expenses
Retirement Contributions
Day-Care Costs.
?? Why Give People These Breaks??
d)
VII) Fiscal Policy
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Can we control the economy through various
tax/spend policies?
Increasingly, the federal/state government
are using their powers of the purse to
improve (or try) our economy…
1917 Creation of the FED
2009 Federal Stimulus Package passed; Cash
for Clunkers.
2010 NYS Budget – massive spending cuts
offset $7.5 Billion deficit.
2011: Signs of recovery. Unemployment at
9.0%
2012: Can we avoid a “Fiscal Cliff?”
2013: Furlough!! Sequestration
OPTION A: RAISE TAXES and SPENDING = less
consumer and business spending, but inflation levels
off. Done to stimulate spending in the economy
through gov’t sponsorship of projects/programs
(NEW DEAL)….CCC
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AKA Keynesian Economics
(John Maynard Keynes)
Or VALUE ADDED TAX (NATIONAL SALES TAX)
OR
OPTION B: LOWER TAXES = stimulates spending by
people/business’, eco. growth, greater employment,
but... inflation may increase (prices go up)
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AKA SUPPLY-SIDE ECONOMICS
AKA REAGANOMICS
AKA Trickle-Down Economics
OPTION C: Cut Spending and Subsidies:
Subsidy – assistance to a business (farm) or economic
sector (oil) to prevent it’s decline or to keep the
commodity (corn) (gasoline) prices down.
On Federal Programs: would allow a portion of debt to
be repaid, reduce burden of taxes, could slow
economic growth or raise unemployment however
 Springville Exercise
VIII) Expenditures/Allocation
Activity
Imagine your Senate Appropriations Committee has
been given an extra Billion Dollars (1,000,000,000) to
spend on a variety of programs that you will
prioritize.
 Yet you have choices:
1) Allocate Money – this program matters
2) Cut Program – it isn’t worth keeping
3) Give to States – let them handle it.
4) Privatize – let business’ handle. S+D
** Teams must utilize each of the options at least once.
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Eligible Programs
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
Interstate Highways 11) Unemployment
National Defense
Insurance
Fire/Police Protection 12) Alcohol and Drug
College Loan Program
Treatment Facilit.
Medicaid
13) School Lunch Subs.
Adult – Ed Job Training
Public Libraries
Air Traffic Controllers
Youth Shelters
Cancer Research Center
Tax Assessment
20
M/C
9 Fill in Blank
10 T/F
(No Essay, Diagrams, Short Answer)
Expect similar format to previous quiz for fill in
blank questions.
Topics: Basic Terms, Tax Forms, Tax Systems, Tax
Types (excise, sin etc.) Fiscal Policy
Regional Exam
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35 Multiple Choice
Constructed Response – 3 questions
1 Thematic Essay
Time: 120 Minutes
10% Basic Concepts
35% Micro (S/D)
35% Macro (Workers, Business’,
Consumer)
Personal Finance 10% (Budget)
Global Economy (Interdependence)
Final Exam
Part I and II
 78 Multiple Choice
 17 True False
Total – 95 questions. You may omit any 5
- 90 points
Part III) Short Essay. Complete questions
from 1 of 2 readings. 10 points