Brainstorm Taxes on Whiteboard:
Federal Deficit Breakdown: http://www.federalbudget.com/
Economic Tax
Taxes: Payments made to the Government that are withheld from income
Proportional Tax-Tax that takes the same % of all incomes; as income rises, the amount of tax paid also rises but % remains the same; also called flat tax.
Example: Some state income taxes are the same rate for every taxpayer.
Q. What does "flat" mean? A. "Flat" simply means "no graduation", or everybody pays the same rate. If you graph income levels with tax rates, there is no rise -- it is "flat."
Q. What is "graduation?" A. Graduation comes from the idea that another dollar added to a rich person's income means less than another dollar to a non-rich person. In other words, when non-rich people get another dollar, they might use it to eat better. When rich people get another dollar, they will only increase their level of luxury slightly, probably unnoticeably. So graduation makes a rich person pay more per additional dollar than a non-rich person. Graduation is part of the current U.S. income tax system. Most other countries use graduation as well.
Q. Who would benefit from a flat tax? A. People with high incomes.
Progressive Tax- Tax that takes a larger % of higher incomes than lower incomes; justified on the basis of the ability-to-pay principle. As individuals earn more income, a larger % of that income is taken for federal taxes, those who make less than a certain minimum pay no federal tax. (pg 430) Example: Federal personal income tax
Regressive Tax- Tax that takes a larger % of lower incomes than higher incomes. Falls hardest on those with the least amount of income. (pg 430) Example: State sales tax on food (not in Ohio)
Direct Tax- A tax that cannot be shifted onto others. Example: Income and property taxes.
Indirect Tax- A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. Example: Fuel, liquor and cigarette taxes. Barstool Economics: http://www.youtube.com/watch?v=Xj7nRc3_EG0
Read “Who pays what?” Warren Buffett and Bill Gates on their taxes: http://www.youtube.com/watch?v=iVOwaMWew Tax payment percentages: http://www.teachablemoment.org/images/taxcharts.pdf
Income bracket breakdown: http://www.google.com/imgres?q=american+income+brackets&um=1&hl=en&safe=strict&sa=N&biw=1280&bih=895&tbm=isch&tbnid=ELPM7sRCroy3kM:&imgrefurl=http://www.mybudget360.com/american-incomes-low-wage-america-top-1-percent-incomes- household-incomes-tax-brackets/&docid=GPnCS5P-Kh1iUM&imgurl=http://www.mybudget360.com/wp-content/uploads/2012/02/tax-bracket-income-breakdown-american- incomes.png&w=475&h=373&ei=PCVOT6enKofm0QG4lZnOAg&zoom=1&iact=hc&vpx=195&vpy=162&dur=1497&hovh=199&hovw=253&tx=140&ty=104&sig=109414693247538841130&page=1&tbnh=165&tbnw=203&start=0&ndsp=20&ved=1t:429,r:0,s:0
Taxes: Where does your money go? Gross pay: The total amount of salary paid before any deductions are taken out.
Net pay: The amount of salary received after taxes and deductions have been taken out.
Deductions: Money taken out of a paycheck for retirement accounts and eligible medical and dental insurance plans. Example: The deductions for those types of benefits are not taxed by the federal government, which means they are essentially excluded from federal taxable wages.
Federal Income Tax: Taxes taken out of a paycheck that go to the federal government.
State Income Tax: Taxes taken out of a paycheck that go to the state government.
City/Local Income Tax: Taxes taken out of a paycheck that go to the city/local government. Example: Not everyone pays city or local taxes; depends on where you live & work
Social Security: Withholdings that go into the federal government program that provides income support to people who are unemployed, disabled, or over the age of 65.
Medicare: Withholdings that go into the federal health insurance program for people 65 and older, and also for people with disabilities.
Before Tax Deduction 401(k): This is an investment that will go toward the employee's retirement. This investment is "tax-deferred" which means the employee will not pay taxes until the contributions and earnings are distributed (generally upon retirement). Not paying taxes means that your investment will increase in value much more quickly. An added benefit is that most people will pay less tax on income when they retire as they will be earning less money in which case they will probably be in a lower tax bracket.
Dental: Contribution to an eligible dental insurance account. HMO: Contribution to an eligible medical insurance account.
Retirement Investment Plans 401(k): An employer-sponsored retirement savings plan funded with money deducted from pre-tax salary, up to an annual cap established by Congress. The employer may match some or all of the employee's contribution.
Mutual fund: A professionally managed investment that pools the capital of thousands of investors to trade in different securities, like stocks and bonds, depending on the investment objectives of the fund.
Compound interest: The interest earned on interest already earned from an investment. It can be figured annually, monthly, or daily.