TAXES
Show me the Money!
Thoughts on Taxes
• “Taxes, after all, are dues
that we pay for the
privileges of membership in
an organized society.”
• ~Franklin D. Roosevelt
Thoughts on Taxes
• “Taxation with
representation ain't so hot
either.”
• ~Gerald Barzan
Thoughts on Taxes
• “Income tax returns are the
most imaginative fiction
being written today.”
• ~Herman Wouk
Thoughts on Taxes
• “I like to pay taxes. With
them I buy civilization.”
• ~Oliver Wendell Holmes, Jr.
Thoughts on Taxes
• " I understand that Congress is considering a socalled 'flat' tax system. How would this
work?" Answer: "If Congress were to pass a
'flat' tax, you'd simply pay a fixed percentage of
your income, and you wouldn't have to fill out
any complicated forms, and there would be no
loopholes for politically connected groups, and
normal people would actually understand the tax
laws, and giant talking broccoli stalks would
come around and mow your lawn for free,
because Congress is NOT going to pass a flat
tax, you pathetic fool." ~Dave Barry
Thoughts on Taxes
• Only 2 things are certain in
Life. Can you tell me what
they are?
• “Death and Taxes!”
• Benjamin Franklin
TAXES VOCABULARY
• 1. WHAT IS A TAX?
• Students???
TAX
• 1. A TAX is money that
people and businesses pay
to support the government
• Any $ paid to the
government
TAX
Any money paid to the
government
• Antonym = Refund
• Synonym = Payment or
Tariff
TAX VOCABULARY
• 2. Regressive Taxes = A
Tax that affects people with low
income more than those with
large incomes
• Not based on a person’s ability to
pay
• EX: License Fees and property
taxes
TAX VOCABULARY
• 2. Regressive Taxes
• Bill Gates pays $50 for a marriage
license and Darius pays $50 for a
marriage license.
• Which person lost a bigger piece of
their income?
• Any flat fees, fines, application fees
are regressive
TAX VOCABULARY
• 3. Progressive Taxes =
• Those taxes that vary with a
person’s ability to pay
• The tax rate goes up as a
person’s income level goes up
• EX: The US Income tax which
taxes income from 10% to 39%
TAX VOCABULARY
• 3. Progressive Taxes =
• Warren Buffet makes $200 million
dollars in 2012 so his tax rate is
39.6%
• Kenny makes $3000 in 2013 so his
rate is 10%
• Uncle Warren can afford to pay more
in taxes
TAX VOCABULARY
• 4. Proportional taxes =
• Those taxes on income that
are assessed at the same
rate for everyone
• EX: Pennsylvania Income
Tax rate is at 3.07%
TAX VOCABULARY
• 4. Proportional taxes =
• Mr. Heinz makes $100,000 in 2013
and PA income tax at a rate of 3.07%
• Nick makes $3000 in 2013 and pays
PA income tax at a rate of 3.07%
• Who pays a higher percent in state
tax?
TAX VOCABULARY
• 5. Income Taxes =
• Any tax that is levied (placed)
on a person’s income received
during the course of the year
• US Income tax is Progressive
TAX VOCABULARY
• 6. Corporate Income Taxes =
Taxes levied (placed) on the
income of a corporation /
business during the year.
TAX VOCABULARY
7. Taxable Income = A
person’s total income (from all
sources) minus certain
deductions and personal
exemptions. This is the
amount the government taxes
you on each year.
WITHHOLDING
• The money held from a person’s income to
pay for their income and social insurance
taxes.
SOCIAL INSURANCE TAXES
• Money the federal government collects to
pay for major social programs to help the
elderly, the ill and the unemployed
• An employer and employees share equally
in this tax. The employer withholds
(deducts) the tax from an employee’s
paycheck and matches it. The Treasury
Department holds the money in a special
account under that SSN.
SOCIAL INSURANCE TAXES
• EX: Social Security – Govt sponsored
retirement program and medical care for
retired persons
• MEDICARE – Govt sponsored medical
care program for retired persons
• UNEMPLOYMENT COMPENSATION –
Combined federal and state program of
financial assistance to the unemployed
STATE INCOME TAX
• A state tax that charges every income
earner the same % of their income
• PA Income tax Rate is 3.07%
• Some states use a progressive tax and
others like PA use a PROPORTIONAL
Rate
TAX VOCABULARY
• 8. Estate Tax = This type of
tax is placed by the federal
government on the estate
(assets) of a deceased (dead)
person
• Rate – 18% to 40% on assets
over $5 million
TAX VOCABULARY
• 9. Inheritance Tax = This
tax is imposed by state
governments on the value
of assets that a person
(beneficiary) receives from
another deceased person
• Rate varies
DEATH V. INHERITANCE TAXES
ESTATE TAX
INHERITANCE TAX
1. Federal Death Tax
2. Tax on value of a
decedent’s estate
1. State Death Tax
2. Tax on value of a
beneficiary’s gift
3. Spouse – No Tax due
4. No tax on first $5million
and then it is progressive
starting at 18% and
moves up to 40% on
everything over $5 million
3. Spouse – No tax due
4. Rates - 4.5% on lineal
descendants (kids and
grandkids and parents)
12% on collateral
beneficiaries (Siblings)
15% on other relatives
21% to non-family
beneficiaries
TAX VOCABULARY
• 10. EXCISE TAX = A federal tax
on the manufacture,
transportation, sale, or
consumption of goods or services
(Gasoline, alcohol, cigarettes)
• States call this a Selective
Sales Tax (Amusement Tax)
TAX VOCABULARY
11. Sales Tax = This is a tax
imposed on a broad range of
items that people buy (nonnecessities)
• EX: Processed foods McD’s
• Currently 6% in PA.
• Can also be an Amusement or
selective sales tax
LICENSE TAXES
• Money paid to the states for the right to do
things
• A REGRESSIVE TAX
• EX: Driver Licenses, motor vehicle
registration, occupation licenses
• Which license fee brings in the most
Revenue $$$?
TAX VOCABULARY
• 12. Severance Tax = This
type of tax is imposed by a
state on the removal of natural
resources intended for use in
other states
• EX: Natural Gas drilling in PA
TAX VOCABULARY
• 13. Property Tax = This
type of tax is imposed by
local government bodies on
the assessed value of the
real property (land) a
person owns
TAX VOCABULARY
• 14. So what in the name of
Jimmy the Greek is a
LOTTERY?
TAX VOCABULARY
• 14. A LOTTERY is state
sponsored gambling.
• EX: Powerball /
MegaMillions / Horsetrack /
etc.
I. TAX BASICS
• 1. What are the 2 most
important things that a
Legislative Branch does?
I. TAX BASICS
• 1. Passing Laws to Raise
Money and Passing Laws to
Spend Money!
I. TAX BASICS
• 1. Congress works in a 2-step
process:
• Step 1 = Authorize a program
• Step 2 = Appropriate (Spend)
Money to pay for the program.
1. TAX BASICS
• 2. Why do the people of the
United States pay taxes?
• BRAINSTORM
I. TAX BASICS
• A. PRODUCTIVTY – The
Government uses tax
money to provide goods
and services to help people
• EX: Schools, roads,
hospitals, the military
I. TAX BASICS
• B. EQUITY – The government
uses tax revenue to
redistribute income form the
rich to the poor.
• Robin Hood Complex
I. TAX BASICS
• C. ELASTICITY – The
government uses tax revenue
in times of crisis.
• EX: Gulf Oil Spill and
Hurricane Katrina
• Hurricane Sandy
I. TAX BASICS
• 3. Any money paid to the
government for any reason is
a TAX.
I. TAX BASICS
• 4. What does the US
Constitution say about the
power to tax?
I. TAX BASICS
• 4. Article I, Section 8 : “The
Congress shall have the power
to lay and collect taxes, duties,
imposts and excises, to pay
the debts and provide for the
common defense and general
welfare of the United States. . .
I. TAX BASICS
• 4. 16th Amendment (1909): “The
Congress shall have the power to
lay and collect taxes on incomes,
from whatever source derived,
without apportionment among the
several states, and without regard
to any census or enumeration.”
I. TAX BASICS
• 5. Understand that the US
Budget is currently running a year
to year deficit and the national
debt exceeds $17 trillion.
• States are also in a budget crisis
at this time.
I. TAX BASICS
• 5. National Debt
• http://www.usdebtclock.org/
I. TAX BASICS
• 6. Congress does not have
control over all spending by the
USA. There is no control over
ENTITLEMENTS.
• Over 70% of the yearly US
budget is money for
ENTITLEMENT PROGRAMS
where there is little discretion.
I. TAX BASICS
• 6. An ENTITLEMENT is a required
government expenditure that must be
made year to year
• EX: Social Security / Medicare / Interest
on the National Debt / Payments to
Government contractors
I. TAX BASICS
• 6. ENTITLEMENTS
I. TAX BASICS
• 6. ENTITLEMENTS