Taxes

There are only two

things guaranteed

What are the Types?

Taxes are something that affects ALL OF
US. There are three different types of
taxes
Federal Taxes- Money goes to
Washington D.C.
State Taxes- Money goes to the state
capital, in Illinois: Springfield
Local Taxes- Money goes to the local
communities

The Federal Government

Where does the money come from?
YOU

Whose money does the government

spend?
Yours

How do they have the power to tax?

U.S. Constitution
The U.S. government collected roughly
$2.16 billion dollars in 2010

What are the Limitations???

What are the limits on the
governments power to tax?
A tax cannot bring in money that
goes to individual interests.
A tax must be for the common defense and
general welfare. ~U.S. Constitution

Federal taxes must be the same in

every state.
The government can only tax
imports

When are they Due?

Tax returns are

due to the
Internal Revenue
Service (IRS)
by

April 15

Pay Up
Personal Income Tax- A tax that a person pays
on their income. This is the largest federal tax
that people pay into constituting 42 % of taxes.
Both a federal and state tax

Corporate Income Tax- A tax that corporations

pay on their profits before they are distributed
as dividends. This constitutes 9% of taxes.
Social Security Tax- A tax that supports
retirement. Half is paid by an employee and half
by the employer. This constitutes 40% of taxes.

The Others
There are three other taxes that
constitute 7% of taxes.
Sales Taxes State
Taxes applied to the purchase of most
products.

Excise Taxes Federal and State

Taxes placed on the purchase of certain
products
Ex. Tobacco, alcohol, gas.

Property Taxes Local

Taxes levied on the value of property or land.

Total
Collected:
$2,162
Billion

How much we pay in taxes

on gas

Where they Spend it

There are TWO ways the U.S.
government spends the money?
1. Mandatory Spending
Money spent does NOT change
Ex. Social Security, Medicare, welfare, etc.

2. Discretionary Spending
Money going to these programs have the
ability to change
Ex. Defense, Education, Disaster Aid,
etc.

Where they Spend it

National Defense: 20% or a total of $689
billion.
Safety Net Programs: Supported programs
that provide aid to individuals and families
facing hardship. 11% or a total of $313 billion.
Interest on Debt: The federal government
must make regular interest payments on the
money it has borrowed to finance past deficits.
6% or a total of $197 billion.

Where they Spend it

Medicare/Medicaid: This is a program that pays
for medical insurance for social security
beneficiaries who are age 65 or older and disabled.
23% or a total of $760.3 billion.
Social Security: This is a program that gives
pensions for retired people. 20% or a total of
$701 billion.
Education, Training, and Social Services: Most
of this money goes to elementary, secondary, and
higher education. 2% or a total of $53 billion.

Total
Spent:
$3,456

How it Works Out

Just as an people, the government has a
budget
Our federal government has accumulated a
national debt of 15.2 trillion dollars!
If we spread that amount by every man, woman,
and child in the U.S., then everyone would owe
$48,800!

A national deficit occurs when the government

spends more money than they bring in
Two primary ways to fix the deficit problem
Decrease government spending
Increase taxes

Stimulate the Economy

Economic Stimulus Act of 2008
Cost an estimated $170 billion
The law provides for tax rebates to
low/middle income taxpayers
$600 per adult
$300 per dependent child

Tax incentives to stimulate business

investment
Increased in the limits imposed on mortgages
eligible for purchase by the government

Stimulate the Economy

American Recovery and Reinvestment
Act of 2009
Cost an estimated $800 billion
The bill included both spending and tax
cuts.
Federal tax cuts
Expansion of unemployment benefits
and other social welfare provisions
Domestic spending in education, health
care, and infrastructure

Taxes that Affect Behavior

The government
sometimes
encourages certain
behaviors through
tax
incentives/credits
People can write off
certain expenses off
on their taxes
Example People
who use solar
power receive an

The Different Kinds of Taxes

1. Proportional (AKA Flat)- Same tax rate for
everyone
2. Progressive- Tax rate rises as taxable income
rises
3. Regressive- Tax rate falls as taxable income
rises
Ex. Sales tax
Higher income households spend a lower proportion of their
incomes on the taxes for products.

What kind of tax does the United States use?

Progressive

What kind of tax does Illinois use?

Flat

How the Progressive Tax

Works