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Taxes. “In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin Taxes are a major responsibility of citizens!. What is the purpose of taxes?. Taxes are collected from everyone in the US in one way or another

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taxes

Taxes

“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

Taxes are a major responsibility of citizens!

what is the purpose of taxes
What is the purpose of taxes?
  • Taxes are collected from everyone in the US in one way or another
  • Taxes pay for every government service, wars, subsidies, parks, roads, public service jobs, etc.
  • Taxes are collected from…
    • incomes of people at the local, state, and federal level
    • Corporations
    • Sales
    • investments and property
income taxes
Income Taxes
  • Taxes on income (the money people make) are progressive: the more money the person makes, the higher the percentage at which they are taxed
  • Every person is required to file a tax return by April 15th each year that states their incomes and a lot of other information
  • Usually, taxes come out of paychecks throughout the year and a person doesn’t have to pay extra when they file taxes… but you can choose to have NO money taken out of your paycheck and pay all your taxes all at once
  • You have to pay taxes even if you don’t like what the government does with your money– this is why voting is so important!
brackets
Brackets

2012 tax rates

Tax rate Single filersMarried filing jointly or Married filing Head of household

qualifying widow/widower separately

10% Up to $8,700Up to $17,400Up to $8,700Up to $12,400

15% $8,701 - $35,350$17,401 - $70,700$8,701- $35,350$12,401 - $47,350

25% $35,351 - $85,650$70,701 - $142,700$35,351 - $71,350$47,351 - $122,300

28% $85,651 - $178,650$142,701 - $217,450$71,351 - $108,725$122,301 - $198,050

33% $178,651 - $388,350$217,451 - $388,350$108,726 - $194,175$198,051 - $388,350

35% $388,351 or more$388,351 or more$194,176 or more$388,351 or more

=

but how it actually works
But how it actually works…

Tax table for single filer on $175,000 income earned in 2011

$8,500 representing 10% taxes

+ $26,000 representing 15% taxes

+ $49,100 representing 25% taxes

+ $90,800 representing 28% taxes

+ $600 representing 33% taxes

deductions credits and more
Deductions, Credits, and More!
  • Only your “taxable income” gets taxed by the IRS (Internal revenue service)…if you reduce the amount of your income that qualifies, you get to keep more of your money
  • How?
    • Deductions: Certain costs qualify as a deduction. Those costs are taken away from your taxable income
    • “Write off” certain expenses as business or other qualifying expenses
    • Put money into qualifying bank accounts, such as an IRA
    • Move money into an off-shore bank account that’s managed by a bank from another country… but that’s a little bit shady!
  • Credits: Cut down your tax bill
    • Child tax credit (up to $1,000 for each qualifying child!)
    • Hybrid/Electric Car Tax Credit (up to $7,500 for a new electric car)
    • Health Coverage Tax Credit (if you qualify, can cover 72.5% of health insurance premiums)
2012 taxmageddon the fiscal cliff
2012: Taxmageddon? The Fiscal Cliff?
  • Our government has not been able to agree on a budget, so 2 things will automatically happen on January 1st:
    • Drastic budget cuts
    • Expiration of tax credits, which, in effect, raises taxes
  • Names to Know:
    • Norquist Pledge: Most Republicans in Congress signed the Norquist Pledge, a promise not to EVER raise taxes, for ANY reason…many are now going back on this in hopes of reaching a compromise
    • Bush Tax Cuts: includes many different tax measures, most famously ones geared towards high earners; if they expire, taxes will go up (on middle-to-high income earners) but the government makes more money
    • Buffet Rule: No one earning more than $1 million should pay less than 30% in taxes. Basically, rich people can find credits, deductions, and loopholes and end up paying a smaller percentage of their income than “regular people” and many want this fixed.
one other idea the fair tax
One other idea: The Fair Tax
  • Instead of taxing incomes, tax only sales
  • People would have more money in their pockets to start with and would pay only when they buy things
  • This gets rid of loopholes, credits, and deductions…and gets rid of people hiding their money overseas or cheating the tax system
  • Ex: I buy a boat for $16,000 and I would have to pay 30% sales tax on it, or $4,800.
  • Ex: I buy groceries for $50 and I would have to pay 30% sales tax on it, or $15.
  • Critics say this is unfair to those earning less because they are taxed at the same rate as everyone else