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Write down your predictions…

Write down your predictions…. A prize to the person who comes closest to guessing the following amounts: How much tax money did the federal government collect in 2012? $2.468 trillion! How much tax money did all governments (federal, state, and local) collect in 2012? $5.132 trillion!.

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Write down your predictions…

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  1. Write down your predictions… A prize to the person who comes closest to guessing the following amounts: • How much tax money did the federal government collect in 2012? $2.468 trillion! • How much tax money did all governments (federal, state, and local) collect in 2012? $5.132 trillion!

  2. Economics of Taxation Unit 6

  3. Principles of Taxation 2 basic principles of taxation • Benefit Principle • Those who receive more benefits from the government should have to pay more in taxes • Examples? • Highway tolls (drivers use the roads more so they pay more) • Ability-To-Pay Principle • Those who have more money should pay more in taxes • Examples? • Income tax

  4. Types of Taxes • Proportional Tax (Flat Tax) • Everyone pays the same percentage of their income • Does that mean everyone pays the same amount of taxes? • NO! • Progressive Tax • The more you make, the higher the percentage of your income you pay • Example? • Federal income taxes • Regressive Tax • The more you make, the lower the percentage of your income is paid for taxes • Example? • Sales Tax

  5. Tax Vocab • When a tax is considered to be fair for everyone, it is referred to as an equitable tax • When a tax has certain conditions that allow some people to avoid paying it, these conditions are known as tax loopholes • Video

  6. Taxes & Consumer Behavior • The government can use taxes to encourage or discourage people from buying/doing certain things • Example: Mortgage Interest Tax Credit • Encourages people to buy houses • Taxes that are used to discourage certain behaviors are known as sin taxes • Taxes on things that are thought to be unhealthy or immoral • Examples? • Cigarette tax • Alcohol tax

  7. Quick Review • When a tax is said to be equitable, what does this mean? • It is fair for everyone • According to the benefit principle of taxation, who should have to pay the most in taxes? • Those who use the most government services • What type of tax takes away a larger percentage of income from those who make more? • Progressive tax • Why does the government impose sin taxes? • To discourage people from unhealthy or immoral behaviors

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