1 / 38

Which taxes do you pay? Make a list with a partner.

Which taxes do you pay? Make a list with a partner. Lesson 5.2 Taxes. Essential Questions: Why does the government tax us? How do progressive, regressive, and proportional taxes differ?. Functions and/or Purposes of Taxation. To pay for government goods/services

jzielinski
Download Presentation

Which taxes do you pay? Make a list with a partner.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Which taxes do you pay? Make a list with a partner.

  2. Lesson 5.2 Taxes Essential Questions: Why does the government tax us? How do progressive, regressive, and proportional taxes differ?

  3. Functions and/or Purposes of Taxation • To pay for government goods/services • To redistribute income • To aid American companies • To discourage the consumption of some goods & services • To stimulate and/or control economic growth (known as “expansionary” or “contractionary” policy)

  4. Federal Taxes • Federal tax policy is determined by Congress and the President. Congress enacts and amends taxes by passing a bill to do so. The President signs these bills into law. • We will be discussing the following federal taxes: • Individual Income Tax • Payroll Taxes • Corporate Income Tax • Excise Taxes • Estate Tax • Gift Tax • Customs Duties

  5. Federal Individual Income Tax Rates In Recent History http://www.efile.com/tax-service/tax-calculator/tax-brackets/ Key Concepts: • 16th Amendment • Payroll Withholding System • Income Tax Return • Gross Income vs. Taxable Income • Exemptions (Dependents) • Standard Deduction vs. Itemized Deductions • Progressive Tax

  6. Individual Income Tax

  7. Gross Income: $450,000 One Exemption: $3,950 Itemized Deductions: $9,207.50 Total Taxable Income: $436,842.50

  8. Gross Income: $450,000 One Exemption: $3,950 Itemized Deductions: $9,207.50 Total Taxable Income: $436,842.50 http://www.efile.com/tax-service/tax-calculator/tax-brackets/

  9. Gross Income: $450,000 One Exemption: $3,950 Itemized Deductions: $9,207.50 Total Taxable Income: $436,842.50 Tax Owed: $130,035.38 Tax Deducted From Paycheck: $140,000 Tax Refund: $9,964.62 George’s Effective Tax Rate: 29% (130,035.38 ÷ 450,000) http://www.efile.com/tax-service/tax-calculator/tax-brackets/

  10. Payroll Taxes • AKA Employment Taxes • AKA FICA Taxes (Federal Insurance Contributions Act) • Must be matched by your employer • Social Security = 6.2% of wages & salaries up to $128,400 (2018 cap) paid by employee and employer. *Self-employed individuals owe 12.4%. • Medicare = 1.45% of wages & salaries (there is no cap) paid by employee and employer. *Self-employed individuals owe 2.9%. • Both taxes combined = 7.65%

  11. Corporate Income Tax Although the federal corporate income tax was 35% for most corporations, the current (2018) corporate income tax rate is 21%. The corporate tax rate was lowered by the Tax Cuts and Jobs Act of 2017. Why do you think that President Trump and members of Congress believed that lowering the corporate tax rate would lead to economic growth? Who benefits from this tax cut?

  12. Excise Tax An excise tax is a tax on the manufacture or sale a particular product. Although this tax is paid by the manufacturer or seller of the product, the seller increases the price of the product to consumers. The list of products that are taxed includes: -Motor Fuels - Gasoline and Diesel -Domestic Airline Tickets -Alcoholic Beverages -Tobacco Products -Firearms -Certain Telephone Communications -Indoor Tanning Services

  13. Estate and Gift Tax Estate Tax: A tax imposed on the transfer of the "taxable estate" of a deceased person. Estates with a market value under $5.45 million are exempt from the federal estate tax (2016 cap). It is a graduated tax (the percentage paid increases as the value of the estate increases). Gift Tax: A tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. Gifts of $5.45 million or less are exempt (2016 cap). The donor is generally responsible for paying the gift tax.

  14. Customs Duty AKA tariffs, these taxes are imposed on the importer of the good. The importer, naturally, increases the price of the product to recoup the cost. Tariffs have the effect of making foreign products more expensive than domestic goods.

  15. Pennsylvania Taxes • Pennsylvania tax policy is determined by the General Assembly and the Governor. The PA General Assembly enacts and amends taxes by passing a bill to do so. The Governor signs these bills into law. • We will be discussing the following Pennsylvania taxes: • Personal Income Tax • Sales and Use Tax

  16. Key PA Taxes • The Personal Income Tax & the Sales and Use Tax are the largest sources of PA revenue • Personal Income Tax – 3.07% regardless of income • Sales and Use Tax – 6% (exclusions: groceries, clothing, textbooks, drugs, firewood, resale items, etc.)

  17. Local Taxes • Several units of local government impose taxes. Each county, municipality, and school district enacts taxes. County taxes are enacted by the County Commissioners. In cities, municipal taxes are enacted by city council. In boroughs, municipal taxes are enacted by borough council. In townships, municipal taxes are enacted by the township commissioners. School taxes are enacted by the elected school board. • We will be discussing the following local taxes: • Local Earned Income Tax • Local Services Tax • Per Capita Tax • Real Estate Tax

  18. Key Local Taxes Local Earned Income Tax – a tax on income paid to the municipality in which you reside. The current rate in Mechanicsburg, Upper Allen Township, and Shiremanstown Borough is 1.7%. Local Services Tax – a tax paid to the municipality in which you work (maximum of $52 per year, and individuals that earn less than $12,000 are exempt). Per Capita Tax – a $5 or $10 annual tax per adult 18 yr. old resident. This tax is imposed by some municipalities and some school districts. Real Estate Tax – annual tax assessed on the value of your real estate (the value of your property is periodically reassessed by the county). This tax is levied by all school districts, most municipalities, and the county.

  19. Map of Municipalities in Cumberland County Real Estate Tax must be paid to: 1.) The County. This tax rate is legislated by the Cumberland County Commissioners. Each county has a different tax rate. 2.) The Municipality (a city, borough, or township). Everyone in Cumberland County lives in a borough or a township. Each municipality has a different tax rate. 3.) The School District. Most school districts include several municipalities. MASD includes the Borough of Mechanicsburg, Upper Allen Township, and the Borough of Shiremanstown. Each school district has a different tax rate.

  20. The Real Estate Tax rate is expressed in “mills”. One mill equals one thousandth of a dollar. One mill is expressed as .001. The tax is computed by multiplying the millage rate set by the taxing body times the assessed value of the property. For example, a homeowner whose property is assessed at $125,000 may pay the following taxes: A. To the County – 1.902 mills (.001902 x 125,000 = $237.75) B. To the Municipality – .957 mill (.000957 x 125,000 = $119.63) C. To the School District – 10.309 mills (.010309 x 125,000 = $1,288.63) Or...calculate by multiplying the property value times the millage rate and then divide by 1,000 The actual taxes will depend upon the millage rates established each year by the taxing districts.

  21. Taxation Considerations • Is the tax fair? Are wealthy or poor people being unfairly penalized? • Who will bear the burden of this tax? Can the taxpayer simply shift the burden to someone else? • Will this tax be a stable and reliable source of revenue? Or, will the revenue fluctuate with the business cycle?

  22. Taxation Considerations: Is the tax fair? Progressive Tax – This tax makes up a higher percentage of the income of individuals with higher incomes when compared to those with lower income (this tax is arguably unfair to the rich) Regressive Tax – This tax makes up a higher percentage of the income of individuals with lower incomes when compared to those with higher incomes (this tax is arguably unfair to the poor) Proportional Tax – This tax is sometimes called a “Flat Tax”. It makes up the same percentage of a person’s income, regardless of their level of income.

  23. Taxation Considerations: Who will bear the burden of the tax? Direct Tax – The person who pays the tax is not able to make someone else pay it. The burden of this tax cannot be shifted to someone else. Indirect Tax– The person who pays the tax is able to pass it on to someone else. The burden of this tax can be shifted to someone other than the taxpayer.

  24. Taxation Considerations: Is the tax a reliable source of revenue? Elastic Tax – The revenue from this tax can vary a lot from year to year, depending on how good or bad the economy is. It yields a lot more revenue during expansion, and a lot loss revenue during recession. Inelastic Tax – The revenue from this tax is not dependent on the business cycle. Expansion and recession do not impact the revenue generated.

  25. Federal Personal Income Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year

  26. Federal Personal Income Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $9,606.25 in tax, which is 17.5% of his income. Bob paid $26,775.75 in tax, which is 22.3% of his income.

  27. Federal Personal Income Tax PROGRESSIVE TAX Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $9,606.25 in tax, which is 17.5% of his income. Bob paid $26,775.75 in tax, which is 22.3% of his income.

  28. Real Estate Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year

  29. Real Estate Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $2,842 in tax, which is 5.16% of his income. Bob paid $2,842 in tax, which is 2.37% of his income.

  30. Real Estate Tax REGRESSIVE TAX Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $2,842 in tax, which is 5.16% of his income. Bob paid $2,842 in tax, which is 2.37% of his income.

  31. Sales Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year

  32. Sales Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $12 in tax, which is 0.0218% of his income. Bob paid $12 in tax, which is 0.01% of his income.

  33. Sales Tax REGRESSIVE TAX Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $12 in tax, which is 0.0218% of his income. Bob paid $12 in tax, which is 0.01% of his income.

  34. Pennsylvania Personal Income Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year

  35. Pennsylvania Personal Income Tax Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $1,688.50 in tax, which is 3.07% of his income. Bob paid $3,684 in tax, which is 3.07% of his income.

  36. Pennsylvania Personal Income Tax PROPORTIONAL TAX Joe Earned $55,000 Last Year Bob Earned $120,000 Last Year Joe paid $1,688.50 in tax, which is 3.07% of his income. Bob paid $3,684 in tax, which is 3.07% of his income.

  37. Government Taxation Policy Summarizer: • Which tax do you believe is the fairest? Why? Explain • Which tax do you believe is the most unfair? Why? Explain

More Related