Unit 5 Study Guide

W-4 Forms–Withholding certificate which determines how much pay should be deducted for taxes

B. Exemptions–Situations that keep people or organizations from paying taxes on some or all of their income

C. Dependent–Child or relative who relies of them for support

D. Deductions–Expenses that a person can claim and take off their income when they file their taxes to reduce their taxable income

E. Head of Household–An unmarried person with dependents

F. Premiums–Payments people make for insurance

G. Health Insurance–Helps to cover medical care

H. Affordable Care Act–Federal program that provides assistance in finding health insurance

I. Medicare–Government-run health insurance program for seniors

J. Medicaid–Government-run health insurance program for lower income people

K. Retirement Accounts–Long-term investments designed to pay money to people when they are older and no longer working

L. Sheltered–Investment money that is not taxed

2. Explain the following types of Retirement Accounts:

A. Pensions–Retirement accounts established for workers by their employers

B. 401(k)--Retirement plan offered by employers where money is automatically taken out of your paycheck and often the amount is matched by the employer….only taxed when money is taken out after retirement

C. 403(b)--Plan that covers public schools and nonprofits…it is an annuity that pays a fixed amount per month…contributions are sheltered

D. Individual Retirement Account (IRA)--Retirement program that can be offered by employers or an employee can invest in on their own

E. Traditional IRA–Contributions are a tax deduction…when money is withdrawn it is then taxed…must start taking out money at age 72

F. ROTH IRA–-Contributions are taxed when taken out of your paycheck…you do not pay taxes on any money withdrawn after age 59 ½

3. Explain these deductions:

A. Flexible Savings Accounts for Healthcare–Money used to pay for medical expenses not covered by health insurance

B. 529 Plan–Savings for college

C. Union Dues–Pays for membership in a union

D. Involuntary Deductions–Mandatory deductions from your paycheck…FICA

E. Pre-tax Deductions–Deductions that are taken out before taxes…reduces your taxable income

F. Post-tax Deductions–-Deductions that are taken out after taxes…ROTH IRA

                                                      What Taxes Pay For

1. Surplus–Government raises more funds in taxes than it spends

      B. Deficit–Government spends more money than it takes in through taxes

2. Congress controls what type of spending?  

Answer : How much of the federal budget does this type of spending account for? Discretionary spending…..35%

3. Mandatory spending includes what items?

A. Social Security and Medicare

B. Interest on Federal Debt

C. Entitlement Programs

4. Mandatory spending is expected to increase to more than 60%.  Explain why? 

Answer : America is aging and national debt is growing

5. Identify what each of the following programs provides and who funds them

(Federal,State,Local) (F,S,L)

A. Economic Development–Grants, reimbursements and loans for businesses that create jobs in NC (F,S,L)

B. Infrastructure Development–Repairing and building roads, airports, bridges, public transportation, rail lines, and facilities needed by businesses to encourage development (F,S,L)

C. Education–Provide money for different educational programs (F,S,L)

D. General Welfare/Quality of Life Cooperative Extension Service–Partnership between NCSU and NC A&T and community agencies to help NC with nutrition, health, gardening, conservation and environmental issues, and to help farmers through research and technology (F,S,L)

 E. Government Operations Board of Elections–Each county has a board of elections that is responsible for carrying out the process of elections efficiently (S.L)

F. Court Facilities–Holds civil and criminal court proceedings, as well as housing important records dealing with civil and criminal cases (S,L)

G. Emergency Management Agencies–Agencies concerned with public safety and those concerned with natural disasters (F,S,L)

H. Jails, Prisons, Youth Detention Centers–Jails, those accused of a crime and awaiting trial or convicted of a misdemeanor.  Prison, those convicted of felonies.  Detention centers are where convicted juveniles are housed (F,S,L)

I. Tax Assessment–Assess the value of property within a county for purpose of levying taxes (S,L)

J. Social Services–Provide service such as placement for abused children, investigating alleged child abuse, helping underprivileged families, assisting with mental illness, helping families faced with crisis  (F,S,L)

Taxes

         Taxes collected by the government pay for what? 

Answer : Government goods and services

1. Identify some of the services provided for by the government through taxes.

A. National Defense

B. Police and Fire

C. Public Schools

2. Explain the two criteria required for an economic activity to be a public good or service.

A. Citizens cannot be prevented from using them (nonexcludable)

B. They can be used by many and possibly all citizens at the same time (nonrivalrous)

3. Give an example of a public assistance program.  Explain how it helps citizens.

 Answer : Supplemental Nutrition Assistance Program (SNAP)....provides money in the form of a debit card for poor people to buy food

4. Name the purpose of public assistance programs. 

Answer : Help keep society stable

5. What is deregulation? 

Answer : Stopping or decreasing government regulation of an economic activity

6. Name the two possible positives of deregulation.

A. Creates competition

B. Lowers prices

7. Name four possible negatives of deregulation.

A. Less safety in the workplace

B. Manufacturing practices that damage the environment

C. Unfair labor policies

D. Civil Rights abuses

8. Explain what each of the following federal taxes are and the purpose (if stated):

A. Social Security–Program meant to provide for income to individuals who have reached the age of legal retirement or are unable to work

B. Medicare–Healthcare program for people receiving Social Security

C. FICA Taxes (How much is each tax)--Taxes taken out of your check for Social Security and Medicare….6.2% for SS and 1.45% for Medicare…paid by employee and employer

D. Excise Taxes–Taxes on specific products like airline tickets, cigarettes, and alcohol…used to pay for cost of the product or discourage use of the product

E. Estate Taxes–Taxes placed on the value of a percent of a person’s property (their estate) after they die…Serves the purpose of a tax on wealth

F. Corporate taxes–Taxes placed on business profits

G. Income Tax–Tax placed on income earned by citizens

H. Capital Gains Tax–Tax paid when an investment such as a stocks are sold for profit

I. Progressive Tax–Tax paid at a different rate depending on the level of income

J. Gas Tax (Include what the tax rate is)--Use to pay for road and bridge construction and repair…..18.3 cents per gallon for gas and 24.3 cents per gallon for diesel

9. Explain what each of the following state taxes are and the purpose (if stated):

A. Income Tax (Include what the tax rate is)--Tax paid on wages and any other source of income such as child support…4.99%

B. Flat Tax (Proportional)--Tax paid in the same proportion regardless of income

C. Sales Tax (Include what the tax rate is for state and county)--Tax paid as a certain percentage of the price of the product being purchased….State 4.75% and County 2-2.75%

D. Gas Tax (Include what the tax rate is)--Used to repair roads…38.5 cents per gallon

10. Identify and explain the only local tax in NC. 

Answer :  Property tax…Supports local government…tax on value of property we own

11. Identify some fees we pay.

A. Registering a business

B. Filing a civil lawsuit in court

C. Renewing a car registration

D. Camping in a state park

E. Tuition, books, room and board, meal plan