Our Government What does our Government do anyway?

Our Government

What does our Government do anyway?

1. Taxes Fund Public Goods and Services

National Defense

State and Local Police

Financial Aid

Health Care for Elderly

Public Education

Social Services

2. Regulates Business Activity

Monopoly and Legal Monopolies Protects Consumers-Agencies

3. Redistributes Income

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Agencies-Enforce the Laws

• USDA (Department of Agriculture)• Consumer Product Safety Commission• Fair Package and Labeling Act• Food, Drug, and Cosmetic Act• Child Protection and Toy Safety Act

Companies that break these laws are penalized!

OK, how does the Gov. pay for all this?

TAXES!!!

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•American Revolution caused debt

The Power to Collect Taxes

•Tax was necessary to pay debt

•Article 1, Section 8 of the U.S. Constitutiongranted Congress power to tax

•Cooking Oil, Foreigners,Slaves (Ancient Egypt)

Early Taxes

•Sales, Inheritance, Imports,Exports (Ancient Rome)

•Beards, Beehives, Boots,Souls (Russia, 1702)

•Bachelors (England,1695; Missouri, 1820)

Each person is responsible for filing a tax return.

Voluntary Compliance

Tax Avoidance versus Tax Evasion

•Tax Evasion: Failure to pay legally due taxes

•Tax Avoidance: Legal means of decreasingyour tax bill

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Who should pay?

• BENEFIT PRINCIPAL

Those who receive the benefit should pay for it

• ABILITY TO PAY

People with higher incomes should pay more in taxes

How is it paid?

• DIRECT

Paid directly to the government

Advantage:Pay-as-you-earnYou know how much

• INDIRECT

Tax is hidden in the price of the goods

Tax Brackets – 2010 Taxable Income1. Income tax-tax paid on income received

Types of Taxes 2. Sales Tax-consumption tax charged at

the point of purchase for certain goods and services

3. Property Tax- paid for owning land & property

4. Excise Tax- placed on certain products to discourage use

Types of Taxes (continued)

5. Social Security Tax- tax is imposed upon working people and their employers

6. Estate & Gift Tax- limits the build-up of wealth

7. Business & License Tax- fees for having a business or activities

8. Tariffs- taxes on imported goods

What are the 3 levels of Government?

FederalStateLocal

The Federal Government Dollar- Where It Comes From

Excise, Customs, Estate, Gift, and

Miscellaneous Taxes7%

Personal Income Taxes

43%Social Security, Medicare,

and Unemployment and other Retirement Taxes

35%

CorporateIncome Taxes

7%Borrowing toCover Deficit 8%

What’s the Trend?

The Federal Government Dollar- Where It Goes

Law Enforcement and General Government

3%

Social Security, Medicare, andother Retirement

38%

National Defense, Veterans, and Foreign Affairs

20%

Social Programs21%

Physical, Human, andCommunity Development

10%

Net Interest onthe Debt

8%

What is our Federal Debt?

• $14 TRILLION!!!http://www.usdebtclock.org/index.html

Federal Tax Dollars• Main source: Personal Income Tax• Main expenditure: Social Security

State Tax Dollars• Main source: State Income Tax2nd: Sales Tax

• Main expenditure: Health & Human Services2nd: Education

2 Tax RatesPROPORTIONAL PROGRESSIVE

$ $

And where did it go? (Federal)

SS, Medicare

National Defense

Interest on Debt

•Information on taxpayer returns is private

Taxpayer Rights

•Taxpayers have the right to appeal anIRS decision

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