Tax Unit
American Government
General Overview
 Governments
need financial resources
to carry out their activities
 Government is required to follow a
budget that balances money taken in
by the government (revenue) with
money it spends (expenditures)
 A TAX is money paid by individuals,
businesses, and organizations to support
the government
 Americans pay a variety of different
taxes
About taxes
 The
federal government require employers to
take money for income taxes from the
paychecks of their employees (payroll
deductions)
 Employers turn the tax money over to the
government
 Taxpayers report his/her income on an income
tax form every year on or before April 15
 Taxpayers take deductions from income:
 Examples: home mortgage payments, interest
paid on bank loans, large medical expenses…
 Issue a refund if the income on which the
person pays taxes is smaller
Types of Taxes
 Regressive
Taxes: this is a tax that does
not change with a persons ability to pay
the tax
 Proportional Taxes: the percentage rate
stays the same regardless of how much
you earn (dollar amount will increase as
your salary increases)
 Progressive Taxes: the percentage rate
increases as the person’s income
increases-people with higher incomes are
expected to pay a higher percentage
rate in taxes
Democrats vs. Republicans
Democrats-favor
a tax
system that is significantly
progressive
Republicans favor a tax
system that is proportional
or even regressive.
Federal Taxes
 Income
Tax: levied on most sources
of income and/or corporations
 Social Security and Medicare: taxes
are places on wages and salaries
 Estate Tax is collected from property
left behind by those that have died.
State and Local Tax
 Income
tax: a tax levied on the
yearly earnings of individuals and/or
corporations
 Sales tax: a tax places on the sale
of various items It is paid by the
purchaser.
 Property tax: a tax levied on the
assessed value of a property that
you own. (Largest source of income
for local governments)
 Licenses
and fees: are charges from a
specific government agency for things
such as court fines, hunting ad fishing
licenses, car registration…ect.
 Inheritance Tax: this is a generally a state
tax paid on the specific items that a
person inherits.
 Amusement tax: a selective sales tax
levied specifically on activities for
entertainment (movie tickets, concert
tickets and sporting events).
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