Our Federal Income Tax Plan

1. Our Federal Income Tax Plan Taxes: Day 2

2. 2012 Tax brackets

3. Definitions Single:  if you are unmarried or "considered unmarried" on the last day of the year Married Filing Jointly: provides more tax benefits, but taxpayers will need to weigh the pros and cons Married Filing Separately:  provides fewer tax benefits than filing joint returns, but taxpayers will need to weigh the pros and cons Head of Household: if you are unmarried, have cared for a dependent for over half the year, and paid more than half the cost of maintaining a home.

4. Tax reform…. • Tax reform can be approached in a variety of ways. Some people worry that new tax plans may only help the rich and not the poor or the middle class. To understand proposed changes in tax plans, we must first understand our current tax plan.

5. Current Tax Table

6. Current Tax Table

7. Current Tax Table

8. Current Tax Table

9. Current Tax Table

10. Current Tax Table

11. Fixed rate Tax Plan • Using a Fixed rate tax plan , calculate your federal income tax if your taxable income was: • a. $5000 • b. $21,150 • c. $63,940

12. Fixed rate tax plan • Using a fixed rate tax plan, compare the tax paid by someone who earns $$85,649 to that paid by someone who earns $85,650.

13. Using a fixed rate tax plan, sketch a graph of Tax paid vs. taxable income for the first two income brackets.

14. Use the results… • Why is this tax plan is open to criticism and debate.

15. Graduated tax plan • Right now our tax plan is more graduated. This means that when you make more than $7550 you are charged 10% on the first $7550 and then 15% on the remaining amount (as long as you don’t make enough to enter another tax bracket).

16. Using a graduated tax rate plan fill in the table and graph your points on the graph above. (use a different colored pencil/pen).

17. Explain why… • Explain why our actual tax tables are fairer than the first plan presented.

18. Example 1: • Calculate the amount John would pay in taxes if his taxable income in $20,000.

19. Example 2: • Calculate the tax that you would pay if your taxable income was $50,000.

20. Example 3: • Complete the chart to show how much tax Larry will pay if his taxable income is $450,000.