Current Event

1. Current Event • The Air Car • Factories will likely be up and running to make these cars around 2011. • Compressed air is used to drive pistons instead of combusting gas. • A small gas-powered motor in the car runs an air compressor. • But you can go 60 miles on a single tank of compressed air.

2. The cars will cost around $20,000. • The Chevy Volt out in November is expected to cost in the mid to high 30s. • A tax credit of around $7500 will apply to both.

3. Percentages (A Review) • Percent means “per one hundred”. • 10% means 10/100. • Which also means 1/10. • If you have a calculator, you can divide tax amount by income. • Person A makes $50, pays $5 in taxes. • Person B makes $25, pays $5 in taxes. • What percent of their income did each pay?

4. Problem #1 • Joe Dirt earned $20,000 in 2008. He paid $6,000 in income taxes. • Ritchie Rich earned $250,000 that year. He paid $6,000 in income taxes. • A) What percent of his income did Joe pay? • B) What percent of his income did Ritchie pay?

5. Problem #2 • Joe Dirt earned $20,000 in 2009. He paid $2,000 in income taxes. • Ritchie Rich earned $250,000 that year. He paid $25,000 in income taxes. • A) What percent of his income did Joe pay? • B) What percent of his income did Ritchie pay?

6. Problem #3 • Joe Dirt earned $20,000 in 2010. He paid $2,000 in income taxes. • Ritchie Rich earned $250,000 that year. He paid $62,500 in income taxes. • A) What percent of his income did Joe pay? • B) What percent of his income did Ritchie pay?

7. Problem #4 • Joe Dirt earned $20,000 in 2010. He was living paycheck to paycheck, & couldn’t afford to save any money. • Ritchie Rich earned $250,000 that year. He saved 50% of his income. • Sales tax in their state is 7% on all purchases. • A) How much money did Joe pay in sales taxes? • B) How much money did Ritchie pay in sales taxes? • C) What percent of his income did Joe pay in sales tax? • D) What percent of his income did Ritchie pay in sales tax?

8. Look at your paper. Which income tax system do YOU think is most fair? • A) Problem 1 • B) Problem 2 • C) Problem 3

9. Regarding income tax • A) everyone should pay the same percent of their income. • B) the wealthy should pay a higher percent of their income than the poor. • C) the poor should pay a higher percent of their income than the wealthy.

10. Look at your paper. Which income tax system is most like our actual income tax? • A) Problem 1 • B) Problem 2 • C) Problem 3

11. Who would be hurt MORE by a higher sales tax? • A) Joe • B) Ritchie

12. I think the dumbest tax is the • A) sales tax • B) income tax • C) property tax • D) excise tax (taxes on specific things like cigarettes, alcohol, gasoline)

13. I think the best tax is the • A) sales tax • B) income tax • C) property tax • D) excise tax (taxes on specific things like cigarettes, alcohol, gasoline)

14. Should the government tax unhealthy foods (soda, fast food, donuts, etc.) to keep health care costs down? • A) Yea! • B) Nay!

15. Right now, I believe the government should • A) cut taxes and cut spending. • B) cut taxes and leave spending unchanged. • C) cut taxes and increase spending. • D) raise taxes and cut spending. • E) raise taxes and leave spending unchanged. • F) raise taxes and increase spending.

16. Say the government decides to tax prescription drug companies for each sale they make. Who is hurt most by that tax? • A) The drug makers. • B) The drug buyers.

17. Types of Taxes • Proportional tax - everyone pays same percentage of income (Medicare, 1.45%). • Progressive tax - higherpercentage of total income paid by people with higher incomes (income tax). • Regressive tax - higherpercentage of total income paid by people with lower incomes (sales tax).

18. Why progressive?? • Marginal utility • Income inequality

19. $10,000 income $1,000,000 • $10,000 spends $800,000 • $700 7% sales tax paid $56,000 • 7% percent of total income paid 5.6% • Poor guy pays higher percent of his income than rich guy in sales tax!

20. Problems • 5) I make $20,000/yr and pay $4,000 in taxes. You make $100,000/yr and pay $10,000. What kind of tax is this? • 6) I make $80,000/yr and pay $24,000 in taxes. You make $25,000 and pay $2,500. What kind of tax is this? • 7) I make $150,000/yr and pay $30,000 in taxes. You make $200,000/yr and pay $40,000. What kind of tax is this?

21. Personal Income Taxes • ½ of the federal revenue. • Depending on amount withheld from checks, you could owe or get a refund. • progressive

22. 2010 Income Tax Rates

23. 2010 Income Tax Rates • $4,681.25=837.50+[15% X (34,000-8,375)]

24. A guy who made $1,000,000 last year paid... • Step 1: $1,000,000 - $373,650 = $626,350 • Step 2: 0.35 X $626,350 = $219,222.50 • Step 3: $219,222.50 + $108,421.25 = $327,643.75 in taxes

25. 8) The average high school teacher salary is $43,000 a year. How much does the average teacher pay in income taxes??

26. These dollar amounts get a little bigger every year. Why is that?

30. Tax Incentives • College education • Healthy lifestyle • Save and/or invest your money • Make your home more energy efficient/buy a more energy efficient car • Buy a home • Have babies • Some Tax Incentives

31. Current Event(s) • Proposed Tax on Sugary Beverages Debated • President Obama has said it is worth considering. • Coca-Cola calls the idea outrageous. • It’s estimated that a penny/ounce tax on sugary beverages would raise $14.9 billion in its first year.

32. Last June, the soft drink industry created an organization called “Americans Against Food Taxes”. • AAFT bought a full-page ad in the Washington Post last Sunday, and has been running commercials on CNN, MSNBC, and Fox News.

33. 4. Which is most closely associated with a progressive tax? • A) sales tax • B) property tax • C) Medicare • D) income tax

34. 7. Person A earns $20,000/yr & pays $2,000 in taxes. Person B earns $100,000/yr & pays $10,000. The tax they both paid was a: • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax

35. 8. Person A earns $20,000/yr & pays $2,000 in taxes. Person B earns $100,000/yr & pays $15,000. The tax they both paid was a: • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax

36. 9. I make $50,000/yr and pay $10,000 in taxes. You make $100,000/yr and pay $15,000. What kind of tax is this? • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax

37. 10. I make $20,000/yr and pay $4,000 in taxes. You make $100,000/yr and pay $10,000. What kind of tax is this? • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax

38. FICA Taxes • Social Security, Medicare (elderly/disabled). • SS proportional (6.2%) up to $107k; not paid above that. So it’s ultimately REGRESSIVE. • Medicare 1.45%

39. Are We Overpaying Grandpa? • As baby-boomers retire, more social security checks are going out. • People are living longer, and collecting SS longer. • Gov’t SS & health programs for the elderly spend about $40k/yr on average per elderly American. • That’s equal to the average American’s annual income.

40. II. FICA Taxes

41. III. Corporate Income Taxes • 3rd biggest source of revenue.

42. Listen • Basic corporate income tax brackets: • 15% up to $50k • 25% between $50k & $75k • 34% $75k & up

44. V. State Gov’t Revenue Sources • 1st -Federal gov’t • 2nd -Sales tax • 3rd -State income tax (progressive)

45. VI. Local Gov’t Revenue Sources • 1st -State and Federal Gov’t • 2nd -Property taxes

46. Advantages: Simple Would eliminate loopholes By reducing need for the IRS and accountants, could save up to $100 billion per year Disadvantages: Removes behavior incentives of current tax code Benefits the wealthy at the expense of the poor. The Flat Tax - Listen

47. Federal Government 1:personal income tax (progressive) 2:FICA Social Security (6.2%, capped at $102k) Medicare (1.45%, proportional) 3:corporate income tax (progressive) State Governments 1:Federal Government 2:sales tax (regressive) 3:state income tax (progressive) Local Governments 1:Federal/State 2:property (usually progressive) Where They Get Their Money From

48. 3. Medicare is a • A) Progressive Tax • B) Regressive Tax • C) Proportional Tax • D) Sin Tax

49. 7. Person A earns $20,000 a year & pays $4,500 in taxes. Person B earns $100,000 a year & pays $10,000 in taxes. The tax they both paid was a: • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax

50. 8. Person A earns $20,000 a year & pays $2,000 in taxes. Person B earns $100,000 a year & pays $20,000 in taxes. The tax they both paid was a: • A) Sin Tax • B) Progressive Tax • C) Regressive Tax • D) Proportional Tax