- Slides: 19
Civic Duties and Taxes • “Taxes are what we pay for a civilized society. ” Justice Oliver Wendell Holmes “People want just (or fair) taxes more than they want lower taxes. They want to know that every man is paying his proportionate share according to his wealth. ” Will Rogers “Collecting more taxes than absolutely necessary is legalized robbery. ” President Calvin Coolidge “Ask not what your country can do for you, but what you can do for your country. ” President John F. Kennedy
Not a new concept… • Paying taxes to the government is almost as old as time. • Early money collected supported the empires of kings and provided revenue for military efforts. • Many will complain about taxes…. . but most still enjoy the benefits paid by the government.
• Local, state, and federal governments use tax dollars to provide many goods and services such as public schools, roads and highways, national defense, safe drinking water, firemen, police, etc. Some of these programs are only paid for at one level of government while others are partnerships between two or more levels.
• Regardless of who provides the service, taxpayers pay for it. The idea is for taxes policy in the US to be fair. • The idea of a “fair tax” is based on the notion that no one segment of society should be treated differently in the eyes of the law. • Problem – what seems fair to one group may seem unfair to another group
Tax Theories • Ability to pay theory – says the people who can afford to pay taxes should pay more than those with a limited ability to pay
• Benefits received theory – based on the premise that the government should tax people who receive the goods and services provided by those taxes. • Only people using the programs would pay the taxes. • Example – people who drive on toll roads in Oklahoma pay fees for those roads. If you do not want to pay fee, don’t drive on it. • Problem – people with limited income may benefit most from programs such as unemployment or food stamps. If these
Progressive or Regressive • Progressive – a tax that takes a larger percentage of income from people in higher-income groups than from people in lower-income ones; federal income tax • As income increases, tax rates increase
• Regressive – a tax that takes a larger percentage of income from people in lower -income groups than from higher-income ones; sales tax – tax paid on goods and services at the point of purchase. • While everyone pays the same amount, lower income households spend more of their earnings to purchase goods and services than people with higher incomes. • Therefore, it is a bigger burden on lower income households.
• Public Goods and Services – Because the idea of fairness is subjective, it becomes a hot political topic at both the state and federal level. • Free rider – The free rider problem happens when people benefit from using goods and services without paying for them. If we do not have to pay, there is little incentive to control these goods or services. Those who are in fact paying will need to pay more to meet the demand.
• Governments provide goods and services for the good of society. • Deciding what the government should provide is like other decisions – governments should provide goods and services as long as the benefits of providing them is greater than the costs associated with them. • Measuring the costs and benefits is difficult – not all individuals have the same benefits and not all individuals
Voluntary Compliance • Ethics – a set of principals or beliefs that govern an individual’s actions • Morals – a system of values and principals of conduct that promotes good customs and virtues while condemning bad customs and vices
• Standard of Living – the quality and quantity of goods and services available to people, and the way these goods and services are distributed within a country • Quality of Life – the overall enjoyment of life and sense of well-being • Voluntary Compliance – a system that relies on individual citizens to report their income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time, according to rules established by the Internal Revenue Service
• Duty? Most people believe that it is their civic duty to pay their taxes. However, some citizens look for ways to cheat the government by using false deductions or failing to report their income. Regardless of their reasons, paying taxes is mandatory. If you do not comply with the law, you will probably end up paying stiff penalties.
• If you do not report the correct amount of income (called underreporting) or if you do not file a tax return, you can face criminal prosecution. • The Internal Revenue Service (IRS), which is a division of the US Treasury, is charged with maintaining the confidence in the federal tax system. • To insure proper filing, the IRS has the right to audit a person’s tax return. • Make sure it file on time – this makes an audit less likely. Keep good records and always be
Who reports? • Everyone who receives a paycheck is required to submit a tax return to the IRS by April 15 th. • Employees receive a W-2 which includes the information you need to complete your tax return. In most states, you are required to pay local and state personal income tax in additional to federal.
Ethics/Moral Issues • Failing to pay taxes is a high risk. One incentive for paying your personal income taxes or any other required tax is knowing you have done nothing illegal if you are questioned by the government.
• Paying taxes is part of your shared responsibility to society. • Good citizenship is at the core of our society; this means doing your part for the common good. Your tax dollars provide public goods and services designed to increase our country’s standard of living and quality of life. • Standard of living relates to the wealth within the country while the quality of life reflects what makes people happy.
• Services supported – clean drinking water and safe roads, support for the elderly, military personnel to defend our nation, etc • Even if an error is an honest mistake, you may pay large fines. If the IRS determines that you willfully committed fraud, you will be tried in court. If found guilty, you will go to jail for tax fraud.