Unit 4 - Understanding Taxes and the Labor Force

Labor Force

Individuals aged 16+ working or seeking work.

Wage

Hourly or daily pay rate for work.

Salary

Annual pay rate for employment.

Supply and Demand

Economic principle affecting wage levels.

High Supply, Low Demand

Results in lower wages for workers.

Low Supply, High Demand

Leads to higher wages for workers.

Skills

More skills typically increase wage potential.

Working Conditions

Job safety and risk affecting pay rates.

Location

Geographic area influencing job pay and mobility.

Intrinsic Rewards

Non-monetary benefits of a job.

Blue Collar Workers

Unskilled laborers performing manual tasks.

Semi-Skilled Workers

Workers with limited skills operating machinery.

Skilled Workers

Professionals with specialized training or skills.

White Collar Workers

Office workers performing clerical or managerial tasks.

Market Trends

Industry growth affecting job availability and wages.

Real GDP

Dollar value of final goods/services produced annually.

Economic Expansion

Period of increasing real GDP and economic activity.

Economic Contraction

Period of decreasing real GDP and economic activity.

Peak

Point where real GDP stops increasing.

Trough

Point where real GDP stops decreasing.

Stagflation

Unemployment and inflation occurring simultaneously.

Recession

GDP decline for two consecutive quarters.

Depression

Severe and prolonged economic downturn.

Labor Market

Supply and demand for workers in the economy.

Interest Rates

Cost of borrowing money, influenced by demand.

Leading Economic Indicators

Predict future economic activity trends.

Coincident Indicators

Indicators that occur simultaneously with economic activity.

Lagging Indicators

Indicators that follow economic trends.

Federal Budget Process

Procedure for preparing and approving the federal budget.

Fiscal Year

12-month period for financial planning.

Deficit

Annual government spending exceeds revenue.

National Debt

Total money borrowed by the federal government.

State Personal Income Tax

Tax on individual income, usually lower than federal.

Sales Tax

Tax on sales, varies by state.

Property Tax

Tax based on property value, varies by community.

Proposition 13

California law freezing property taxes at 1978 levels.

Capital Expenditures

Funds spent on acquiring or upgrading physical assets.

Monetary Policy

Federal Reserve's control over money supply and interest rates.

Personal Income Tax

Tax on individual earnings, filed annually by April 15.

Tax Day

April 15, deadline for filing tax returns.

Progressive Tax

Tax rate increases with higher income brackets.

Tax Bracket

Range of income taxed at a specific rate.

Social Security Tax

6.2% on income up to $168,600 annually.

Medicare Tax

1.45% on total income, no cap.

FICA

Federal Insurance Contributions Act, funds Social Security and Medicare.

Estate Tax

Tax on deceased individuals' property value.

Gift Tax

Tax on gifts over $17,000 per year.

Lifetime Exemption

$13,610,000 exemption for gift tax as of 2024.

Corporate Income Tax

Tax on corporate profits, varies by profit level.

Excise Taxes

Tax on specific goods, often regressive.

Tariffs

Taxes on imported goods to protect domestic industry.

Benefit Principle

Taxation based on benefits received from government services.

Ability to Pay Principle

Taxation based on individuals' financial capability.

Average Tax Rate

Constant percentage tax rate regardless of income.

Proportional Tax

Flat tax where everyone pays the same percentage.

Marginal Tax Rate

Tax rate that applies to the last dollar earned.

Regressive Tax

Higher percentage tax burden on lower incomes.

Direct Taxes

Taxes paid directly to the government by individuals.

Indirect Taxes

Taxes levied on goods, paid by consumers indirectly.

Sin Taxes

High taxes on harmful products to discourage use.

California Proposition 56

2016 tax increase on cigarettes by $2 per pack.