Financing the Government

Mrs. SamplePersonal Finance Unit6th SS

Revenue

Income to pay expenses Examples of Expenses include

elected officials and public employees.

The government must also pay for public good and services provided to the people.

Public goods and services include defense, health services, education, etc.

Revenue

Revenue comes from a variety of sources, but taxes provide most of the money.

Taxes are charges collected from individuals and businesses.

State and local governments also collect taxes to pay expenses.

Power to Levy Taxes

Taxes have been apart of our history since colonization.

Over-taxation was the major reason colonists fought for freedom from Great Britain.

The Constitution gives Congress the power to levy taxes and to collect taxes

Levy= to impose or assign

Types of Taxes

Income: Collected by city, state, and/or federal

gov’t. Based on the annual earnings of

individuals or businesses Property:

collected by a school district, local gov’t, and/or state gov’t.

Based on the value of the residence or property

Types of Taxes

Sales: Collected by a local and/or state

government Based on the purchase price individuals

pay for goods and services Social Security:

Collected by the federal government Paid by workers and employers on

wages earned

Progressive vs. Regressive Tax

Two major types of taxes Progressive- the more individuals

earn, the more taxes they pay. Example: Personal Income tax

Regressive: people pay the same amount of tax. Example: Sales tax

Think about it??

Which do you think would affect poor people the most?

Which do you think richer people would prefer?

What is a positive for both types of taxes?

What is a negative for both types of taxes?

Income Taxes

First federal income tax was collected in 1862 to help pay the cost of the U.S. Civil War.

Prior to the Civil War there was not an income tax; instead revenue came from tariffs on imported goods.

When the war came to an end, the tax was repealed (taken away).

The government taxed items such as beer, tobacco, and chewing gum.

1913- 16th amendment was passed giving the gov’t the right collect income tax.

Withholding Tax

Income tax is a tax on the money an individual or business earns in one year.

Cities, states, and/or the federal government collect the tax.

Gov’t set up a system of tax withholding to make the payment and collection of personal income taxes more convenient for taxpayers.

The employers are responsible for subtracting a certain amount of money from each employee’s paycheck and sending the money to appropriate governments.

Pay Day

People are given a pay stub each time they are paid (paper or electronically)

The pay stub shows details such as how much money has been earned and how much tax has been deducted from the paycheck.

The pay stub is a way for the employee to have a record of earnings and deductions.

Filing Tax Returns

The deadline for paying personal income tax is April 15th of each year.

Taxpayers are legally responsible for submitting a tax return to the Internal Revenue Service (IRS).

Many people send their tax returns through the post office. Many taxpayers use electronic filing because it is faster and more convenient.

When the IRS receives a tax return, it checks for accuracy.

Trying to avoid paying taxes (tax evasion) is illegal.

Filing Tax Returns

As a result of the withholding taxes, some tax payers may still owe income tax at the end of the year, while others may be entitled to a refund.

A refund depends on whether the employer has withheld too much or not enough money from an employee’s paycheck.