Taxes and IRS

Multiple Choice

The government agency in charge of collecting tax.

• FICA
• IRS
• NBA
• SEC

Taxes And Spending

“In this world, nothing is certain

but death and taxes”
-Benjamin Franklin

What are Taxes?

• Taxes are payments people are required

to pay to local, state and national
governments.

• Taxes are used to pay for services

provided by government:
– Schools
– Police
– Defense
– Etc.

Taxes and the Constitution

• Article 1, Section 8, Clause 1 of the

Constitution grants Congress the power to
tax.

• The Sixteenth Amendment gives

Congress the power to levy an income tax.

Multiple Choice

Who pays taxes

• everybody

• only those who invest in stocks

• only those who watch Saturday morning cartoons

• only those who earn $20,000

Limits on the Power to Tax

Certain taxes are prohibited or limited in the

Constitution:

• The purpose of the tax must be for “the

common defense and general welfare”

• Federal taxes must be the same in every

state

• The government may not tax exports

Impact of Taxes

• Types of taxes affect people differently,

depending on their income. 3 forms of
taxes are:

Progressive Tax
Regressive Tax
Proportional Tax

Progressive Tax

• Def. Tax designed to take a larger

percentage of income from the wealthy
than the poor.

• Argument for: the wealthy can afford a

higher tax and should pay more of the tax
burden.

• Argument against: why should the hardest

working and most successful pay more
taxes? Wealthy are penalized for their
success.

• Ex. Income Tax with Tax Brackets

Progressive Tax (cont.)

• A person making $20,000 pays 10%

income tax ($2000). Their after tax income
is $18,000.

• A person making $200,000 pays 30% tax

($60,000). Their after tax income is
$140,000.

Fill in the Blank

The United States Federal government has a ____________ income tax system. • The people who make the least pay a lower tax rate. • The more you make, the larger the percentage you must pay

Regressive Tax

• Def. Tax which takes a higher percentage

of income from the poor than from the rich.

• Ex. Sales Tax
• Argument for: Tax levied on what is

bought. If you cannot afford the tax, do not
buy the item.

• Argument against: Tax harms those who

can least afford it.

Regressive Tax (cont.)

• Two people buy a $20,000 car. They both

pay $1600 in sales tax.

• The first person makes $30,000. The sales

tax is 5.3% of his income. He has $28,400
left after paying the tax.

• The second person makes $100,000. The

sales tax is 1.6% of his income. He has
$98,000 left after paying the tax.

Multiple Select

Income taxes are paid on any money earned . • Includes wages and profits from investments • Are paid by individual citizens and by businesses. They are collected by _______ goverment(s) (check all that apply)

• Federal

• State

• Local

Proportional Tax

• Def. A tax that takes the same percentage

of income from the wealthy and poor.

• Argument for: Everyone is equal- pay same

% of income.

• Argument against: The poor need their

income more than the wealthy. They need
every penny and cannot afford as much of a
tax as the wealthy.

• Ex. “Flat Tax” Income Tax, (does not exist in

our country, but some political parties
support the idea)

Proportional Tax (cont.)

• On a “Flat” Income tax of 20%:
• A person making $20,000 pays $4000,

after tax income= $16,000

• A person making $200,000 pays $40,000,

after tax income= $160,000

Multiple Choice

a tax paid on personal income

• revenue

• income tax

• property tax

• sales tax

• withholding