CIVICS IN PRACTICE
HOLT
Chapter 12
Paying for Government
Section 1: Raising Money
Section 2: Types of Taxes
Section 3: Managing the Country’s Money
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CIVICS IN PRACTICE
HOLT
Section 1: Raising Money
The Main Idea
Each year the local, state, and federal government provide
Americans with services such as police, schools, highway
construction, and defense. These services cost huge amounts
of money. The government pays for these services with taxes
collected from citizens.
Reading Focus
 Why is the cost of government so high?
 What guidelines do governments use when taxing citizens?
 Other than taxes, what are two ways to pay for government?
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: Raising Money
The cost of government is high due to:
 A population of more than 310 million people
 The rising cost of living
 More government programs and services like
defense spending and payments to the elderly,
disabled, or impoverished
 The national debt
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: Raising Money
Deciding how to spend the
government’s money:
 Officials establish government’s priorities.
 Priority is given based on urgency and need.
 Debate over the country’s priorities is
common.
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HOLT, RINEHART
AND
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CIVICS IN PRACTICE
HOLT
Section 1: Raising Money
Principles of taxation:
 Ability to pay—based on earned incomes;
poor do not pay income tax
 Equal application—tax applied at the same
rate for similar taxable items
 Scheduled payment—taxes due by April 15
 Fees, fines, and payments for special services
also raise government funds.
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HOLT, RINEHART
AND
WINSTON
SECTION 1
CIVICS IN PRACTICE
HOLT
Question: What guidelines do governments use
when taxing citizens?
ability to pay
Principles of
Taxation
equal application
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scheduled
payments
HOLT, RINEHART
AND
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CIVICS IN PRACTICE
HOLT
Section 2: Types of Taxes
The Main Idea
Taxes are the main source of revenue for the
local, state, and federal governments. The
types of taxes each level of government uses
to raise money vary.
Reading Focus
 What are the two main kinds of income taxes?
 What are the other major types of taxes?
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HOLT, RINEHART
AND
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CIVICS IN PRACTICE
HOLT
Section 2: Types of Taxes
Different types of taxes:
 Individual income tax—the largest source of tax
revenue; most citizens pay federal, state, and local
income taxes
 Sales and excise tax—sales taxes are collected by
state or local governments; excise taxes (on “luxury”
items) are collected by the federal government
 Property taxes—chief income for most local
governments; funds public education
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HOLT, RINEHART
AND
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CIVICS IN PRACTICE
HOLT
Section 2: Types of Taxes
Different types of taxes: (continued)
 Estate, inheritance, and gift tax—estates of the
deceased, value of inheritances, and monetary gifts
above $10,000 are taxable by the federal government
 Import tax—tariffs on imported products used to
regulate trade
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CIVICS IN PRACTICE
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Section 2: Types of Taxes
Progressive and Regressive Taxes
 Progressive taxes take a larger percentage of
income from high-income groups. Example:
individual income tax
 Regressive taxes take a larger percentage of
income from low-income groups. Example:
sales taxes
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HOLT, RINEHART
AND
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CIVICS IN PRACTICE
HOLT
Section 2: Types of Taxes
Tariffs and the U.S. Economy
 Tariffs are taxes placed on goods imported from
foreign countries.
 Tariffs can help the U.S. economy by:
 Regulating trade
 Retaliating against tariffs placed by foreign countries
on U.S. goods
 Protecting American industries against foreign
competition
 Raising prices on foreign goods
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HOLT, RINEHART
AND
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SECTION 2
CIVICS IN PRACTICE
HOLT
Question: What are the differences between
progressive and regressive taxes?
PROGRESSIVE
TAX
takes a larger
percentage of
income from
higher-income
groups.
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takes a larger
percentage of
income from
lower-income
groups.
REGRESSIVE
TAX
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CIVICS IN PRACTICE
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Section 3: Managing the Country’s Money
The Main Idea
The federal, state and local governments collect and
spend many billions of dollars each year. Each level
of government has systems to manage public funds.
Reading Focus
 How do governments collect public money?
 What steps are involved in spending public money?
 How do governments account for your money?
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HOLT, RINEHART
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CIVICS IN PRACTICE
HOLT
Section 3: Managing the Country’s Money
How governments collect public money:
 Internal Revenue Service—collects federal
taxes
 U.S. Customs Service—collects taxes on
imported goods
 State and local governments collect taxes
through their own collection agencies.
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CIVICS IN PRACTICE
HOLT
Section 3: Managing the Country’s Money
Steps in creating the federal budget:
 Office of Management and Budget and the president
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prepare the budget.
The prepared budget is published and sent to
Congress for study.
Congress debates the budget and makes changes.
Both houses must approve the budget.
The budget is passed with 13 appropriations bills.
Bills are sent to the president for approval or veto.
HOLT, RINEHART
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CIVICS IN PRACTICE
HOLT
Section 3: Managing the Country’s Money
The National Debt
 1970–1997—The government spent more than it
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collected.
Money was borrowed to make up the difference.
Interest on the borrowed money increases the debt.
Government bonds used to borrow money are being
bought by foreign investors.
Clinton plan for balanced budget in 2002 was
thwarted by recession and terrorism.
HOLT, RINEHART
AND
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CIVICS IN PRACTICE
SECTION 3
HOLT
Question: How do governments collect
public money?
Government Collection of Public Money
Government
Collection of Public Money
Federal “collection agency”
Internal Revenue Service
Role of the “collection agency”
collects individual income taxes, corporate
income taxes, Social Security taxes, excise
taxes, estate taxes, and gift taxes
State and local “collection agencies”
collects state income and inheritance
taxes as well as local property taxes
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Chapter 12 Wrap-Up
1. Identify six reasons for the high cost of government.
2. Identify and explain the principles the government
uses to try to make taxation fair.
3. Why must governments borrow money? How do they
borrow money?
4. How is individual income tax calculated, and how do
citizens pay individual income taxes?
5. What is the difference between a progressive tax and a
regressive tax, and what is an example of each?
6. What is the difference between a surplus and a deficit?
7. What is the national debt, and how might it be
harmful to the country?
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HOLT, RINEHART
AND
WINSTON