Chapter 5 Section 4

Principles of Taxation
Rino Watson, Mia Stella
 GuideLines
Explain the purpose of taxation
Describe taxes payed by U.S. consumers
Explain principles of tax fairness
Identify Major government spending categories
 Purpose of taxation
To fund public goods and services

To influence behavior

To stabilize economy

To redistribute income
Purpose of taxation cont.
tax money goes to building highways and fixing roads,funding parks. Taxes is the
main some of revenue collected by the government for public use.
The taxes people pay
Income taxes

12.37% federal,3.60% local of total income

Social security taxes

6.2% for employer and 6.2% for employee 12.4% total

Sales tax

10.25% for everything to buy in chicago

Taxes
Excise tax

Tax goods such as beer,alcohol,gasoline etc

Property tax

Money paid for property you own

Estate/gift taxes

Tax imposed on the transfer of property/gifts

Business and licensed tax
Fee paid to government to get a license/own a business

Example: doctoral license

Taxes and Fairness
Benefit Principle

You pay for what you use

Ability-to-pay Principle

People who earn more pay more

Tax Rates
Flat Tax - everyone pays same amount
Graduated Tax - people who earn more pay more
Relationship of Taxes to Income
Proportional Tax

Same percentage out of everyones income

Progressive Tax

Larger percentage out of higher income

Regressive Tax

Larger percentage out of lower income

How Taxes are Spent
Mandatory Spending (62%)

Social Security, transportation, food, labor, etc.

Discretionary Spending (31%)

Military, education, health, housing, etc.

Federal Debt (7%)

Remains go to interest in federal debt

Sources
http://www.investopedia.com/ask/answers/13/government-spend-taxes.asp

http://www.taxrates.com/calculator/?referrer=https://www.google.com/&lastRef
errer=www.taxrates.com

http://www.investopedia.com/terms/p/propertytax.asp

https://www.vocabulary.com/dictionary/license%20tax