Economics Chapter 10

3 main purposes of taxes

revenue, discourage unwanted behavior, encourage desired behavior

3 categories for government spending

mandatory 66%, discretionary 26%, interest 8%

2 countries that own significant U.S. debt

Japan, China

Term for required payments to the government

taxes

What is needed for governments to fund programs?

revenue

Where does most revenue come from?

taxes

True or False: Most government programs improve our quality of life

true

discourages undesirable behavior

sin tax

the value of the activities or assets subject to the tax

tax base

a specific percentage of the tax base that is paid in taxes

tax rate

Three regions of government that can charge taxes:

federal, state, and local

When are Federal income taxes due

April 15

a form you will complete and submit to the government when you pay your income taxes

tax return

To whom do you return your tax return documents

Internal Revenue Service (IRS)

The IRS is part of what Executive agency?

The U.S. Department of Treasury

examination of tax records to make sure an individual or firm paid the correct amount of taxes

audit

True or False: All states collect a state income tax.

false

a tax collected from employers on the basis of the wages and salaries paid to workers

payroll tax

What is the largest payroll tax?

social security tax

What % does the employee pay towards Social Security taxes?

6.2%

What % does the employer pay towards Social Security taxes?

6.2%

If you are self-employed what is the % you paid towards Social Security taxes?

12.4%

covers health insurance over the age of 65, unemployment, disability

medicare tax

a tax on corporate profits that is paid directly by the corporation

corporate tax

True/False: Corporate tax in the U.S. dropped from 35% to 21%

true

What is the advantage of a low corporate tax rate

Encourages businesses to operate in the U.S. and allows them to have more money to invest

What is the advantage of a high corporate tax rate

Higher taxes equals more revenue for the government

True/False: Corporations pay taxes since they are considered a legal individual

true

a required payment made by the owners of property

property tax

True/False: Alabama has a high property tax rate

false

True/False: The state of Alabama has a 4% sales tax rate

true

collected from consumers by firms when a taxed good or service is purchased

sales tax

tax on sales of a specific good, such as gasoline, and is typically assessed as a certain amount of money per unit rather than a percentage of the price

excise tax

What is an example of an excise tax?

tobacco

True/False: Compared to other countries the United States has a high tax rate.

false

the value of goods and services produced within the country in a given year

GDP

What does GDP stand for?

gross domestic product

Country with the highest taxes?

Denmark

True/False: You will pay a gift tax on any gift over the amount of $10,000

false

True/False: An increase in a tax rate would increase demand even though the price of the product did not change.

false

True/False: An increase in a tax rate placed on the company could decrease the amount of a good supplied or the company could decide to increase the price of the good to cover the tax.

true

True/False: It is everyone’s civic duty to pay taxes.

true

True/False: A person who does not pay taxes can be arrested for tax evasion.

true

People with a higher income pay a higher share of their income in taxes

progressive tax

What is an example of a progressive tax?

U.S. income tax

People with a higher income pay a lower share of their income in taxes

regressive tax

What is an example of a regressive tax?

U.S. sales tax

everyone pays the same share of their income in taxes, regardless of their income

proportional tax

What is another name for proportional tax?

flat tax

you fill it out when hired so your employer will know how much to withhold from your paycheck for taxes

W-4

needed to fill out taxes, tells you how much you made in a year and how much was withheld for taxes

W-2

tells you how much interest you made in a year

1099

tells you how much you made in dividends in a year

1099-DIV

form used to fill out your taxes

1040

Internal Revenue Service

IRS

What is the estimated interest on the U.S. debt in 2022?

476 billion

What is the approximate U.S. debt?

33.6 trillion

What is most of the discretionary funding spent on?

defense

When does the fiscal year start?

October 1

Who was the President responsible for a surplus in 1999, 2000 and 2001? What party did he belong to? What party controlled congress during these years?

Bill Clinton, Democratic, Republican

Income before taxes

gross income

Income after taxes

net income