Chapter 7: Federal Income Taxes
Types of Taxes:
The government spends money collected from citizens and businesses in the form of taxes, this
money is called _______________.
-largest source of government revenue is _______________
-“A commonly accepted principle of tax fairness is that individuals with higher incomes
should pay more taxes than people with low incomes. This theory is called
________________. Does Obama agree or disagree with this principle?
1. _______________ are taxes that take a larger share of income as the amount of income
grows. Example of this type of tax: _______________.
a. Low income pays 15%, high income 28%
b. Everyone must pay income taxes on their income.
2. _______________ are taxes that take a smaller share of income as the amount of
income grows. Example of this type of tax: _______________. People with lower
incomes pay greater percentage of their income.
a. Arkansas charges a 6% state sales tax rate.
i. If you buy an item worth $10 your tax would be $0.60 so you would pay
$10.60 for that item. For someone who earns $60 a week, these 60 cents
represents _______________ of income. For someone who earns $100 a
week, these 60 cents represents ______________.
b. Almost all _______________ taxes are regressive.
i. Example of consumption tax: _______________
1. Examples of excise taxes: ____________, ____________,
____________, ____________
3. _______________, or flat taxes, are taxes for which the rate stays the same, regardless
of income. Example of this type of tax: _______________. All people who own
property in the same community pay the same tax rate regardless of the value.
4. Local level: taxes provide services such as _______________, _______________, and
_______________. National level: _______________, _______________, and
_______________.
a. Most of the services are provided for the welfare of all citizens even though
individually you may not benefit from them all.
Components of the Tax System:
Our tax system is _______________.
_______________ and _________________ pay income taxes and must file income tax returns
each year. There are 3 components that allow the tax system to operate: _______________,
_______________, and _______________.
1. The IRS
a. Agency of the ____________________.
b. Main functions of the IRS: _______________ and _______________.
2. The Power to Tax
a. Power to levy taxes rests with _______________.
b. The _______________ provides that “all bills for raising revenue shall originate
in the House of Representatives.”
3. Paying Your Fair Share
a. Income tax system is _______________. Tax rates increase as taxable income
increases.
i. Tax rates apply to income ranges, or _______________.
1. ________________ tax brackets
2. Lowest bracket is taxed __________.
3. Highest bracket is taxed __________.
ii. When the government spends more than it receives in revenue, it has a
_______________. It has to then borrow money to pay its expenses.
iii. Income tax system is based on ____________________, which means
that all citizens are expected to prepare and file income tax returns.
1. Due date for taxes each year: ______________.
2. Responsibility for filing and paying taxes falls upon
_______________.
3. Failure to file/pay can result in _______________,
________________, and ________________.
a. Willful failure to pay taxes is ________________.
b.
Who is this man? What did he do?
4. An IRS Audit
a. _______________ is an examination of the tax return.
Definitions of Terms:
1. 5 choices of Filing Status:
a. Single person
b. Married person filing a joint return
c. Married person filing a separate return
d. Head of Household
e. Qualifying widower
2. Exemptions
a.