This document discusses different types of taxes in the United States at the federal, state, and local levels. At the federal level, it describes the personal income tax, corporate income tax, social insurance tax, excise tax, estate and gift tax, import taxes. It also discusses mandatory and discretionary spending by the federal government. For states, it outlines that education is typically the largest expense, while other spending includes public safety, highways, and public welfare. Sources of state revenue are sales tax and varied income taxes. Local governments also spend on services and raise revenue through property taxes.

1. Chapter 14: Taxes Economics CP

2. Chapter 14 Section 1

3. Depending on the elasticity of an item, different groups pay the tax Taxes cause the cost of supplying a good to increase, therefore supply decreases Who bears the burden of taxes?

4. The supply/ demand graph tells us: Inelastic supply: consumer pays most of the tax Elastic supply: business pays most of the tax Burden of Taxation Graph

5. Tax = payment to gov’t Federal Tax Basics

6. Tax Return determines income tax Taxable income = income – (exemptions (b/c of dependents) + deductions (amts. you can subtract) Deductions used as incentive (ex. Purchasing a house; purchasing an energy efficient car) Due to IRS April 15! Personal Income Tax “pay as you earn” – gov’t constantly has bills to pay & lump sum difficult to pay Therefore, tax money “withheld” – taken before you can spend it Types of Federal Taxes

7. Corporate Income Tax Complicated although progressive! Types of Federal Taxes

8. Social Insurance Tax FICA (Federal Income Contribution s Act) funds Social Security, Medicare, & unemployment Excise Tax Tax on certain goods Sometimes used as “sin tax” to discourage behavior or gain revenue from nonessentials Types of Federal Taxes

9. Estate & Gift Tax Estate – what deceased left behind; progressive; for the wealthy Gift – created so estate tax could not be avoided; tax on items given Types of Federal Taxes

10. Import Taxes/ tariff Types of Federal Taxes

11. Chapter 14 Section 3

12. Gov’t has taxes and revenue ($ from non-tax sources) to spend Gov’t Spending Divided Among 2 Categories Fed. Gov’t Spending

14. Entitlement programs – benefits people receive b/c they qualify

15. (Don’t write) Entitlements are like MC Hammer’s song … you can’t touch this!

16. Discretionary (optional)

17. ½ available does to defense

18. Examples: education, research, student loans, national parks/ monuments, law enforcement, disaster aid, foreign aid, farm subsidies, civilian workersFederal Gov’t Spending

19. Chapter 14 Section 4

20. Operating: day to day expenses (MUST BE BALANCED) Capital: major investments & spending (FINANCED BY MUNICIPAL BONDS) State budgets

21. Education! Biggest expense b/c federal gov’t doesn’t Public safety Highways & transportation Public Welfare Arts & Recreations Administrator’s salaries State Expenditures

22. Has to be creative Can’t tax imports/ exports Federal Gov’t has a large income tax Solution = sales tax! Taxes & State Gov’t

23. Sales tax Income tax – varied in handling by state; less than Fed. Tax Corporate income tax – low to entice corp. Other – licenses, fines Sources of State Taxes/ Revenue

24. towns, cities, townships, school districts, counties Local Gov’t Spending & Taxes

25. Local Gov’t