Government Spending Taxation Taxation Why Taxes Government Expenses

Government Spending & Taxation

Taxation

Why Taxes?

Government Expenses Mandatory Discretionary Entitlements Interest on Debt Operating Budget should we or shouldn't we?

Why so much Political Debate? n Discretionary spending – should we or shouldn't we? • • • Capital budget – major projects Defense, Education Tax incentives to encourage certain behaviors – tax credits or exemptions Shouldn’t we work towards a balanced budget?

Tax Base Areas subject to taxation n Income (city, state, federal) n Sales (state) n Property (local) n Corporate income tax (business profits)

Tax Structures n Progressive - percentage increases as income increases – income tax (income tax brackets) n Proportional – flat tax – same percentage regardless of income (property tax) n Regressive – smaller percentage of income is taken in taxes as income increases – (sales tax)

Income Tax Progressive Structure 16 th Amendment: The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Federal Taxes n Why is there money taken out of my check? W 4 – withholdings n How much of my salary is taxed? W 2 – taxable income n n n Doesn’t the government realize that I need my salary to live? -Personal exemption What about other expenses too, like work related uniform costs, or education? – deductions How much in total do I have to pay the government? Tax schedule - Brackets n What if I have paid them too much- 1040 ez - tax return (refund? )

2013: $3, 900

Personal Exemption Individuals are entitled to claim a personal exemption for themselves and any dependents they support. 2013: 2012: 2011: 2010: 2009: 2008: $3, 900 $3, 800 $3, 700 $3, 650 $3, 500

Deductions Should I Itemize? Topic 501 Medical and Dental Expenses Topic 502 Deductible Taxes Topic 503 Home Mortgage Points Topic 504 Interest Expense Topic 505 Charitable Contributions Topic 506 Miscellaneous Expenses Topic 508 Business Use of Home Topic 509 Business Use of Car Topic 510 Business Travel Expenses Topic 511 Business Entertainment Expenses Topic 512 Educational Expenses Topic 513 Employee Business Expenses Topic 514 Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas) Topic 515