Taxes Chapter 14 Section 1 What are Taxes

Taxes Chapter 14, Section 1

What are Taxes? ? • A required payment to a local, state, or national government. • Generates revenue(income) for the government.

Where do they get the nerve…? • Legitimacy established in the Constitution • Power to tax established in Article 1 • A weakness of the Articles of Confederation not to be repeated

Limitations on Taxation • Purpose must be for the “common defense and general welfare of the people. ” • Federal taxes must be the same in every state. • Can’t tax exports.

16 th Amendment • Establishes an income tax in 1913. • Cannot levy a tax unless they are distributed evenly amongst the states according to population.

Proportional tax • Tax with percentage remaining the same for all levels of income.

Progressive Tax • Tax for which percentage taken increases as income increases

Regressive Tax • Tax for which percentage paid decreases as income increases.

Simplicity and Efficiency • Simplicity: read simply and easily understood----Know why you are being taxed and how much is taken out. • Efficiency: Government can collect taxes quickly and cheaply. Don’t want to pay extra for the government to collect taxes.

Certainty and Equity • Certainty: how much, when, and procedure for payment---wouldn’t know when they are due and how much • Equity: no one should have too much or too little of a tax burden-----EQUAL—People would pay too much or not enough

2 Theories of Fairness • Benefits-Received: person should pay taxes based on level of benefits they expect to receive. • Ability-to-Pay: Pay according to ability to pay.