• “Taxes are what we pay for a
civilized society.” Justice Oliver
Wendell Holmes
“People want just (or fair)
taxes more than they want
lower taxes. They want to know
that every man is paying his
proportionate share according
to his wealth.” Will Rogers
“Collecting more taxes than
absolutely necessary is
legalized robbery.”
President Calvin Coolidge
“Ask not what your
country can do for
you, but what you
can do for your
country.” President
John F. Kennedy
• Paying taxes to the government is almost as
old as time.
• Early money collected supported the empires of
kings and provided revenue for military efforts.
• Many will complain about taxes…..but most still
enjoy the benefits paid by the government.
• Local, state, and federal governments use tax
dollars to provide many goods and services such
as public schools, roads and highways, national
defense, safe drinking water, firemen, police, etc.
Some of these programs are only paid for at one
level of government while others are partnerships
between two or more levels.
• Regardless of who provides the service,
taxpayers pay for it. The idea is for taxes
policy in the US to be fair.
• The idea of a “fair tax” is based on the
notion that no one segment of society
should be treated differently in the eyes
of the law.
• Problem – what seems fair to one group
may seem unfair to another group
• Ability to pay theory – says the
people who can afford to pay taxes
should pay more than those with a
limited ability to pay
• Benefits received theory – based on the premise that
the government should tax people who receive the
goods and services provided by those taxes.
• Only people using the programs would pay the taxes.
• Example – people who drive on toll roads in
Oklahoma pay fees for those roads. If you do not
want to pay fee, don’t drive on it.
• Problem – people with limited income may benefit
most from programs such as unemployment or food
stamps. If these people are in need of public
assistance, how can they pay more?
• Progressive – a tax that takes a larger
percentage of income from people in higherincome groups than from people in lowerincome ones; federal income tax
• As income increases, tax rates increase
• Regressive – a tax that takes a larger
percentage of income from people in lowerincome groups than from higher-income ones;
sales tax – tax paid on goods and services at
the point of purchase.
• While everyone pays the same amount, lower
income households spend more of their earnings
to purchase goods and services than people
with higher incomes.
• Therefore, it is a bigger burden on lower
income households.
• Public Goods and Services – Because the idea
of fairness is subjective, it becomes a hot
political topic at both the state and federal
level.
• Free rider – The free rider problem happens
when people benefit from using goods and
services without paying for them. If we do not
have to pay, there is little incentive to control
these goods or services. Those who are in fact
paying will need to pay more to meet the
demand.
• Governments provide goods and services
for the good of society.
• Deciding what the government should
provide is like other decisions – governments
should provide goods and services as long
as the benefits of providing them is greater
than the costs associated with them.
• Measuring the costs and benefits is difficult
– not all individuals have the same benefits
and not all individuals have the same costs.
•Ethics – a set of principals or beliefs that
govern an individual’s actions
•Morals – a system of values and principals
of conduct that promotes good customs and
virtues while condemning bad customs and
vices
•Standard of Living – the quality and quantity of
goods and services available to people, and the
way these goods and services are distributed
within a country
•Quality of Life – the overall enjoyment of life
and sense of well-being
•Voluntary Compliance – a system that relies on
individual citizens to report their income freely
and voluntarily, calculate their tax liability
correctly, and file a tax return on time, according
to rules established by the Internal Revenue
Service
• Duty? Most people believe that it is their
civic duty to pay their taxes. However, some
citizens look for ways to cheat the
government by using false deductions or
failing to report their income. Regardless of
their reasons, paying taxes is mandatory. If
you do not comply with the law, you will
probably end up paying stiff penalties.
• If you do not report the correct amount of income
(called underreporting) or if you do not file a tax
return, you can face criminal prosecution.
• The Internal Revenue Service (IRS), which is a
division of the US Treasury, is charged with
maintaining the confidence in the federal tax
system.
• To insure proper filing, the IRS has the right to audit
a person’s tax return.
• Make sure it file on time – this makes an audit less
likely. Keep good records and always be honest!
• Everyone who receives a paycheck is
required to submit a tax return to the IRS by
April 15th.
• Employees receive a W-2 which includes the
information you need to complete your tax
return. In most states, you are required to
pay local and state personal income tax in
additional to federal.
• Oklahoma residents pay state and federal.
• Failing to pay taxes is a high risk. One
incentive for paying your personal
income taxes or any other required tax
is knowing you have done nothing illegal
if you are questioned by the
government.
• Paying taxes is part of your shared
responsibility to society.
• Good citizenship is at the core of our society;
this means doing your part for the common
good. Your tax dollars provide public goods
and services designed to increase our
country’s standard of living and quality of
life.
• Standard of living relates to the wealth
within the country while the quality of life
reflects what makes people happy.
•Services supported – clean drinking water
and safe roads, support for the elderly,
military personnel to defend our nation, etc
•Even if an error is an honest mistake, you
may pay large fines. If the IRS determines
that you willfully committed fraud, you will
be tried in court. If found guilty, you will
go to jail for tax fraud.