Federal Taxation Chapter 14 Summary
CLASS SET Chapter 14 CLASS SET What are Taxes?
Section One: 1. Citizens of the United States authorize the government, through the Constitution and elected officials, to raise money through taxes. 2. Taxation is the primary way that the government collects money. 3. Without revenue, or income from taxes, government would not be able to provide goods and services. 4. Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax. 5. The Sixteenth Amendment gives Congress the power to levy an income tax. 6. The power to tax is also limited through the Constitution. 7. The purpose of the tax must be for “the common defense and general welfare.” 8. Federal …show more content…
taxes must be the same in every state. 9. The government may not tax exports. 10. A tax is the income, property, good, or service that is subject to a tax. 11. A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels. 12. A progressive tax is a tax for which the percent of income paid in taxes increases as income increases. 13. A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases. 14. A good tax has the following characteristics: 15. Simplicity: Tax laws should be simple and easily understood. 16. Economy: Government administrators should be able to collect taxes without spending too much time or money. 17. Certainty: It should be clear to the taxpayer when the tax is due, how much is due, and how it should be paid. 18. Equity: The tax system should be fair, so that no one bears too much or too little of the tax burden. 19. To fully evaluate the fairness of a tax, it is important to think about who bears the burden of the tax. The incidence of a tax is the final burden of the tax. 20. If demand is inelastic, a tax will increase the price of a good and consumers will bear a large burden of the tax. If demand is elastic, the opposite is true. 21. The power to tax is granted by the United States Constitution to congress. 22. All of the following are characteristics of a good tax: economy, certainty, equity.
Section Two: 23. “Pay-as-You-Earn” Taxation: Federal income taxes are collected throughout the course of the year as individuals earn income. 24. Tax Withholding: Withholding is the process by which employers take tax payments out of an employee’s pay before he or she receives it. 25. Tax Brackets: The federal income tax is a progressive tax. In 1998, there were five rates, each of which applied to a different range of income. 26. A tax return is a form on which you declare your income to the government and determine your taxable income. 27. Taxable income is a person’s total (or gross) income minus exemptions and deductions. 28. Exemptions are set amount that you subtract from your gross income for yourself, your spouse, and any dependents. 29. Deductions are variable amounts that you can subtract from your gross income. 30. Like an individual, a corporation must pay a federal tax on its taxable income. 31. Corporate income taxes are progressive — as a company’s profits increase so does the amount paid in taxes. 32. Social Security Taxes: This program is funded by the Federal Insurance Contributions Act (FICA). Most of the FICA taxes you pay go to Social Security, or old-age, Survivors, and Disability Insurance (OASDI) 33. Medicare is a national health insurance program that helps pay for health care for people over 65 and for people with certain disabilities. Medicare is also funded by FICA taxes. 34. Unemployment taxes are collected by both federal and state governments. Workers can collect “unemployment compensation” if they are laid off through no fault of their own and if they are actively looking for work. 35. An excise tax is a tax on the sale or production of a good. Federal excise taxes range from gasoline to telephone services. 36. An estate tax is a tax on the estate, or total value of the money and property, of a person who has died. Estate taxes are paid before inheritors receive their share. 37. A gift tax is a tax on the money or property that one living person gives to another. 38. Taxes on imported goods are called tariffs. 39. Taking taxes out of an employee’s wages before he or she receives them is called withholding. 40. How is the federal income tax a progressive tax? The higher the income a person has, the higher the percentage that person pays as tax. Section Three: 41. Mandatory spending refers to money that lawmakers are required by law to spend on certain programs or to use for interest payments on the national debt. 42. Discretionary spending is spending about which government planners can make choices. 43. An entitlement program is a social welfare program that people are “entitled” to if they meet certain eligibility requirements. 44. Social Security is the largest category of government spending. 45. Medicare pays for certain health benefits for people over 65 or people who have certain disabilities and diseases. 46. Medicaid benefits low-income families, some people with disabilities, and elderly people in nursing homes. Medicaid costs are shared by the federal and state governments. 47. Spending on defense accounts for about half of the federal government’s discretionary spending. 48. Defense spending pays military personnel salaries, buys military equipment, and covers operating costs of military bases. 49. List 3 other discretionary spending categories: education, training, environmental cleanup. 50.
All of the following are examples of mandatory spending: Medicare, Social Security, Medicaid 51. An entitlement program is a program to provide benefits to people who meet certain requirements Section Four: 52. A state’s operating budget pays for day-to-day expenses. These include salaries, supplies, and maintenance of state facilities. 53. A state’s capital budget pays for major capital, or investment, spending. 54. Some states have laws requiring balanced budgets. These laws, however, only apply to a state’s operating budget. 55. State education budgets help finance public state universities and provide some aid to local governments for elementary, middle, and high schools. 56. State governments operate state police systems, as well as correctional facilities within a state. 57. Building and maintaining highways is another state expense. States also pay some of the costs of waterways and airports. 58. State funds support some public hospitals and clinics. States also help pay for and administer federal benefits programs. 59. State parks and some museums and historical sites are funded by state revenues. 60. Like the federal government, state governments spend money just to keep
running. 61. Because trade and commerce are considered national enterprises, states cannot tax imports or exports. They also cannot tax goods sent between states. 62. Sales taxeds are the main source of revenue for many states. 63. Different states have various other means to collect revenue, such as state income taxes, excise taxes, corporate income taxes, business taxes, and property taxes. 64. Property taxes are the main funding of local revenue. These taxes are paid by people who own homes, apartments, buildings, or land. 65. Local government sometimes collects excise, sales, and income taxes as well. 66. Some taxes, such as room and occupancy taxes, are aimed at nonresidents in order for local governments to earn additional revenue. 67. List 3 sources or revenue for most state governments: intergovernmental revenue, income tax, sales tax 68. What is a tax assessor? Someone who determines the value of a property.
• Define & Illustrate the following: 69. Individual Income Tax- a tax on a person’s earnings. [pic] 70. Real Property- physical property such as land and buildings. [pic] 71. Tax Incentive- the use of taxation to encourage or discourage certain behavior. [pic] 72. Tax Exempt- not subject to taxes. [pic] 73. Balanced Budget- budget in which revenues are equal to spending. [pic] 74. Personal Property- possessions such as jewelry, furniture, and boats. [pic]
Section One: 1. Citizens of the United States authorize the government, through the Constitution and elected officials, to raise money through taxes. 2. Taxation is the primary way that the government collects money. 3. Without revenue, or income from taxes, government would not be able to provide goods and services. 4. Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax. 5. The Sixteenth Amendment gives Congress the power to levy an income tax. 6. The power to tax is also limited through the Constitution. 7. The purpose of the tax must be for “the common defense and general welfare.” 8. Federal …show more content…
taxes must be the same in every state. 9. The government may not tax exports. 10. A tax is the income, property, good, or service that is subject to a tax. 11. A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels. 12. A progressive tax is a tax for which the percent of income paid in taxes increases as income increases. 13. A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases. 14. A good tax has the following characteristics: 15. Simplicity: Tax laws should be simple and easily understood. 16. Economy: Government administrators should be able to collect taxes without spending too much time or money. 17. Certainty: It should be clear to the taxpayer when the tax is due, how much is due, and how it should be paid. 18. Equity: The tax system should be fair, so that no one bears too much or too little of the tax burden. 19. To fully evaluate the fairness of a tax, it is important to think about who bears the burden of the tax. The incidence of a tax is the final burden of the tax. 20. If demand is inelastic, a tax will increase the price of a good and consumers will bear a large burden of the tax. If demand is elastic, the opposite is true. 21. The power to tax is granted by the United States Constitution to congress. 22. All of the following are characteristics of a good tax: economy, certainty, equity.
Section Two: 23. “Pay-as-You-Earn” Taxation: Federal income taxes are collected throughout the course of the year as individuals earn income. 24. Tax Withholding: Withholding is the process by which employers take tax payments out of an employee’s pay before he or she receives it. 25. Tax Brackets: The federal income tax is a progressive tax. In 1998, there were five rates, each of which applied to a different range of income. 26. A tax return is a form on which you declare your income to the government and determine your taxable income. 27. Taxable income is a person’s total (or gross) income minus exemptions and deductions. 28. Exemptions are set amount that you subtract from your gross income for yourself, your spouse, and any dependents. 29. Deductions are variable amounts that you can subtract from your gross income. 30. Like an individual, a corporation must pay a federal tax on its taxable income. 31. Corporate income taxes are progressive — as a company’s profits increase so does the amount paid in taxes. 32. Social Security Taxes: This program is funded by the Federal Insurance Contributions Act (FICA). Most of the FICA taxes you pay go to Social Security, or old-age, Survivors, and Disability Insurance (OASDI) 33. Medicare is a national health insurance program that helps pay for health care for people over 65 and for people with certain disabilities. Medicare is also funded by FICA taxes. 34. Unemployment taxes are collected by both federal and state governments. Workers can collect “unemployment compensation” if they are laid off through no fault of their own and if they are actively looking for work. 35. An excise tax is a tax on the sale or production of a good. Federal excise taxes range from gasoline to telephone services. 36. An estate tax is a tax on the estate, or total value of the money and property, of a person who has died. Estate taxes are paid before inheritors receive their share. 37. A gift tax is a tax on the money or property that one living person gives to another. 38. Taxes on imported goods are called tariffs. 39. Taking taxes out of an employee’s wages before he or she receives them is called withholding. 40. How is the federal income tax a progressive tax? The higher the income a person has, the higher the percentage that person pays as tax. Section Three: 41. Mandatory spending refers to money that lawmakers are required by law to spend on certain programs or to use for interest payments on the national debt. 42. Discretionary spending is spending about which government planners can make choices. 43. An entitlement program is a social welfare program that people are “entitled” to if they meet certain eligibility requirements. 44. Social Security is the largest category of government spending. 45. Medicare pays for certain health benefits for people over 65 or people who have certain disabilities and diseases. 46. Medicaid benefits low-income families, some people with disabilities, and elderly people in nursing homes. Medicaid costs are shared by the federal and state governments. 47. Spending on defense accounts for about half of the federal government’s discretionary spending. 48. Defense spending pays military personnel salaries, buys military equipment, and covers operating costs of military bases. 49. List 3 other discretionary spending categories: education, training, environmental cleanup. 50.
All of the following are examples of mandatory spending: Medicare, Social Security, Medicaid 51. An entitlement program is a program to provide benefits to people who meet certain requirements Section Four: 52. A state’s operating budget pays for day-to-day expenses. These include salaries, supplies, and maintenance of state facilities. 53. A state’s capital budget pays for major capital, or investment, spending. 54. Some states have laws requiring balanced budgets. These laws, however, only apply to a state’s operating budget. 55. State education budgets help finance public state universities and provide some aid to local governments for elementary, middle, and high schools. 56. State governments operate state police systems, as well as correctional facilities within a state. 57. Building and maintaining highways is another state expense. States also pay some of the costs of waterways and airports. 58. State funds support some public hospitals and clinics. States also help pay for and administer federal benefits programs. 59. State parks and some museums and historical sites are funded by state revenues. 60. Like the federal government, state governments spend money just to keep
running. 61. Because trade and commerce are considered national enterprises, states cannot tax imports or exports. They also cannot tax goods sent between states. 62. Sales taxeds are the main source of revenue for many states. 63. Different states have various other means to collect revenue, such as state income taxes, excise taxes, corporate income taxes, business taxes, and property taxes. 64. Property taxes are the main funding of local revenue. These taxes are paid by people who own homes, apartments, buildings, or land. 65. Local government sometimes collects excise, sales, and income taxes as well. 66. Some taxes, such as room and occupancy taxes, are aimed at nonresidents in order for local governments to earn additional revenue. 67. List 3 sources or revenue for most state governments: intergovernmental revenue, income tax, sales tax 68. What is a tax assessor? Someone who determines the value of a property.
• Define & Illustrate the following: 69. Individual Income Tax- a tax on a person’s earnings. [pic] 70. Real Property- physical property such as land and buildings. [pic] 71. Tax Incentive- the use of taxation to encourage or discourage certain behavior. [pic] 72. Tax Exempt- not subject to taxes. [pic] 73. Balanced Budget- budget in which revenues are equal to spending. [pic] 74. Personal Property- possessions such as jewelry, furniture, and boats. [pic]