AP Tax and the Budgetary Process

1. • “ In this world, nothing can
be said to be certain, except
death and taxes.” Benjamin Franklin

2. • “Death and taxes may be
certain, but we don’t have to
die every year.” anonymous

3. Taxes?
• What types/kind of taxes do American
pay?

4. What are Taxes Used for…?

5. Financing Government
• Objectives: SWBAT -
• Understand how the Federal Government raises
money
• Differentiate between the various types of
federal/state/local taxes
• Determine why the government must borrow
money
• Discover how the federal Government spends
money
• Explain how the President and Congress
prepare the federal budget

6. The Power to Tax
• Congress uses this power to pay for
government’s expenses
• Regulate things government thinks are
dangerous

7. Individual/Personal Income Tax
• Tax on “earnings”
• Direct tax
• Progressive tax
• Brings in the largest amount of $ to the
federal gov’t
Tax Chart 2015

8. Tax Return
• April 15th
• Income – W2 form, interest – 1099,
Winnings, profit from sale, gifts, etc.
• Exemptions - credits for certain people
• Deductions – expenses not taxed,
charities, interest in mortgages
• IRS – processes tax returns

9. Corporate Income Tax
• Tax on business profits
• Progressive tax
• Non profit organizations and charities are
not taxed

10. Social Insurances taxes
• Three important programs
– Social Security
– Medicare
– Unemployment
– Paid by both employer and employee
– Regressive taxes – same rate

11. Excise Taxes
• Indirect tax the gov’t puts on the making,
selling , or using of certain goods and
services
• Gas, telephone services, cable, beer
• Tax built into the price

12. Estate and Gift Taxes
• Estate – on the property and $ of a person
who has died
• Gift – a tax on gifts over 14,000

13. Custom Duties
• Taxes on goods brought in to this country
• Tax on goods above a certain threshold

14. Sales Taxes
• taxes placed on the sale or lease of goods
and services in the United States.
– Can be
» National
» State
» Local
» Pa 6%
» Phila 2%

15. Non Revenue Taxes
• To regulate harmful activities
• “Sin taxes” (alcohol, cigarettes, smokeless
tobacco, gas guzzlers)

16. Non-Tax Revenue and Borrowing
• Fees for passports, court fines, sale of
property, etc.
• Borrow to cover additional costs
– Wars, big projects, pay deficit

17. Public Debt
• Also called the national debt
– Amount borrowed but not yet paid back
– Includes interest
– Deficit spending – borrowing to meet
expenses
Debt Clock

18. Spending and the Budget
• Budget – plan for income and expenses
– Entitlement programs – paying to people who
meet certain requirements
• Largest area of spending
• Social Security. Medicare, food stamps,
unemployment
– Interest on national debt
– Defenses spending

20. Controllable vs. Uncontrollable
Spending
• Controllable – Congress and the President
can raise or lower
• Uncontrollable – gov’t must spend
because it promised it will do so.
(Entitlements – Social Security, welfare)
• Most government spending is
uncontrollable

21. Federal Budget
• Government’s yearly plan for spending
• President and Congress work on the
budget
• President and OMB (Office of
Management and the Budget) put budget
together
• Congress studies and decides on
spending limits

22. What Happens When The Costs of
Government Exceed Revenue?
• 1.?
• 2.?
• 3?

23. What Happens When The Costs of
Government Exceed Revenue?
• 1. Cut expenses; cut government
programs; cut spending
• 2.?
• 3?

24. What Happens When The Costs of
Government Exceed Revenue?
• 1. Cut expenses; cut government
programs; cut spending
• 2. Raise taxes
• 3?

25. What Happens When The Costs of
Government Exceed Revenue?
• 1. Cut expenses; cut government
programs; cut spending
• 2. Raise taxes
• 3. Borrow more money let future
generations pay back