WARM UP 10/13/16

What are some of the things our

government does with tax revenue

?

Happy International
Day for Failure!

HHS

I can explain why taxes are a necessary

part of consumer economics

I can complete a mock 1040 and identify
which information is crucial to do so

BY THE END OF CLASS

HOMEWORK

AGENDA
Warm-Up
Stocks Recap
Unit I so far
Taxes
Filing Taxes

STOCKS RECAP
Overall did you lose or did you gain?
Biggest money maker/ biggest money

loser ($)
Biggest percentage loss/ gain
Are they the same?
3 generalizations you can make about
the stock market as a whole

UNIT I SO FAR
Goal Setting (SMART)

Investing vs. Saving

Career Research

Investment tools

Benefits

Credit fundamentals

Insurance

ID Theft

Financial Institutions

Entrepreneurship

WHAT ARE TAXES?

Taxes
A sum of money demanded
by a government to support
the government itself as
well as specific facilities or
services
Paid by taxpayers
A person who pays a
tax to national, state,
county or municipal
(city/town)
governments

Are you a
taxpayer?

COMMUNITY
Community - a
group of people
working
together for a
common good
United
States

State

County

City/
town

WHAT ARE BENEFITS OF BEING A

PART OF THESE COMMUNITIES?

Roads

Libraries

Public
schools

Military for
national
security

Police and fire

departments

Recreation
(parks, trails)

YOU ARE BETTER OFF BEING IN A

COMMUNITY THAN BY YOURSELF
As a community
member you receive
many benefits you could
not pay for individually
Taxes are a way that
members of a
community provide for
one another

HOW DO YOU BENEFIT FROM

TAXES?
1. Make a list of things you use or

benefit from that were funded, at

least in part, by taxes
2. How do these items contribute to
your well-being?
Physic
al
3. What would you do
Financia
Intellectua
if you didnt have
l
l
these items?
Emotion
al

Socia
l

HOW DO TAXPAYERS PAY TAXES?

Income Tax

Excise
Tax

Sales
Tax

Payroll
Tax

Property
Tax

INCOME TAX
Income tax tax on earned
and unearned
income
Unearned
Earned
income - income
income
received from
-money earned
sources other
from working
than employment
for pay
Example: Wages
Example:
and salaries
Interest earned
earned from
from a savings
employment
account

COMPONENTS OF INCOME TAX

Federal
income
tax
Income tax
State
incom
e tax

FEDERAL INCOME TAX

Tax is
determined
by?
Earned and
unearned
income
Higher income
= More tax
paid

Paid by?
Majority of
people living
in the U.S.

Helps fund?
Operations of
federal
government
Government
programs
Education
Defense of
the nation
Disaster
relief

STATE INCOME TAX

Tax is
determined
by?

Earned and
unearned
income
Higher
income =
More tax paid

Paid by?

Helps fund?

Those living in
states with a
state income
tax
Not all states
have a state
income tax

Varies by state
Examples:
State
highways
Operations of
state
government

Does your state

have state income
tax?

PAYROLL TAX
Payroll tax A tax on earned income
that supports the Social Security and
Medicare programs (also known as FICA)
Tax is
determined
by?
A set
percentage of
earned
income
Deducted out
of paycheck
(except for
self-employed)

Paid by?
Individuals
who earn
income from
working for
pay
Employers

Helps fund?
Social
Security
program
Medicare
program

WHAT IS SOCIAL SECURITY?

Purpose
Income for:
Retirees
People with
profound
disability
Children who
have lost a
parent
A person with
children who has
experienced the
death of a

Tax
charged

6.2% of earned
income
(decreased to
4.2% for 201112)
Up to an
annual
maximum

WHAT IS MEDICARE?

Purpose
Helps pay for
health care for
senior citizens

Tax
charged

1.45% of
earned income
No limit

EMPLOYERS ALSO PAY SOCIAL

SECURITY AND MEDICARE
Match their employees tax contributions

Employer
pays
Employee
Employer
$200 in
contributio
contributio
payroll
n:
n:
taxes to
$100
$100
the
federal
Self-employed people pay governme
both
the employee and employernt

contributions

WHAT IS THE DIFFERENCE BETWEEN

INCOME TAX AND PAYROLL TAX?
Income Tax
Paid on both earned
and unearned
income
Amount paid
depends on many
different factors but
increases as income
Funds
many different
increases

Payroll Tax
Paid on only earned
income
A set percentage of
earned income is
paid

Funds the Social

operations and programs
Security and
of the federal
Medicare programs
government

PROPERTY TAX
Property tax - a tax on property, such as land,
buildings (including homes), and motor vehicles

Tax is
determined
by?

Percentag
e of
property
value
Amount
paid varies
depending
upon
where you
live

Paid by who?

Helps fund?

Property
owners
o Fee to
license
car is a
property
tax

Schools
Expenses of
state and
local
governments

SALES TAX
Sales tax - a tax on items purchased in retail stores

Tax is
determined
by?

A percentage
added to the
original price
of an item
$1.00 item
charged 6%
sales tax =
$1.06

Paid by?
Anyone who
purchases an
item charged
with sales tax
Some states
dont have
sales tax

Helps fund?

Expenses
of state
and local
governme
nts
Does your state
have sales tax?

EXCISE TAX
Excise taxes - taxes charged on consumption items

Tax is
determined
by?

Purchase of
certain items:
Gas
Hotel
rooms
Airline
tickets
Cigarettes
Alcohol
Often
included
within the

Paid by?

Helps fund?

Anyone who
purchases
certain items
Varies by
location

Expenses of
state and
local
governments

HOW ARE TAX RATES

DETERMINED?
Determined by public representatives (city
councils, county commissions, state
legislatures, Congress)
Elected by voters

Taxpayers = voters
Work as a voting group to elect representatives
who will represent the majority

TAXES AND MONEY

MANAGEMENT
Taxes play a
role in both
earning and
spending

One of the
largest
expenses for
many people

Why do you think understanding

taxes is an important part of money
management?

SUMMARY
Without taxes it would be
hard to pay for many of
the benefits of being a
member of a community

The amount of taxes you

pay and what you pay
those taxes on will vary
depending upon where
you live and your income

Taxes are charged in

many different forms

Understanding taxes is
an important part of
money management

NO TAXATION WITHOUT CALCULATION

HOW TO COMPLETE YOUR TAX FORMS
In your group, examine the profile given to you.
Calculate how much the person or couple spends per year in

the given situation.

Estimate and incorporate other relevant costs missing from the list, like
entertainment, clothing, travel and the like.

Make sure that you are listing realistic figures for total yearly expenses!
Think about your own budget.

Determine how much yearly income would be necessary to

cover these expenses.

DID YOU FORGET SOMETHING?

20 to 40 percent of your income will be taken by the

government in the form of federal, state and local taxes.

How does that change your income estimates?

Read the following article titled Seeking the Path to a

Simpler Tax Code and answer the following questions on

the next screen.

QUESTIONS
For discussion and reading comprehension
Answer these questions on a separate sheet of paper.
1.

How does the federal tax policy defy the basic laws of
math?

2.

What did the White House and Republican lawmakers agree

on with respect to taxes?

3.

What does broaden the base, lower the rates mean?

4.

How many changes have been made to the tax code in the
past 15 years?

5.

Why will 50 million taxpayers likely pay more in taxes in

2011 than they did in 2010?

HOW TO FILE
1040EZ how to complete
Requirements to file a 1040EZ:

total income must be less than $100,000

the filer must have no dependents

taxable interest must be less than $1,500

Work with the members of your group to complete a

1040EZ using the information from the scenario given to

you at the beginning of class.

ASSESSMENT - DISCUSSION
Was it easy to complete a 1040EZ? What was difficult?
Why is the tax code so complicated?
How do some people/companies avoid paying taxes?
Are people in different socioeconomic classes taxed

differently?
How does the government determine who gets tax

incentives and who doesnt?