Download - Raising Revenue AKA Fiscal Policies
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Raising RevenueAKA Fiscal Policies
• The federal government can’t develop and sustain its programs without revenue– The income the
government collects from us.
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How does the Federal government make revenue?
• Taxes– Charges laid on individuals and businesses
by a government.
• THIS IS THE FEDERAL GOVERNMENTS PRIMARY SOURCE OF REVENUE!!
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Federal Taxes
• How does the federal government collect taxes from an individual? – Income taxes!!
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Individual Income Tax
• Makes up the federal government’s largest source of revenue. – Around 70% of all federal revenue comes from
personal income tax.
– What does this include? • Wages and salaries• Business profits• Tips• Dividends
– Payments received as a return on an investment
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Individual Income Tax, cont.
• Personal income tax is based on a progressive tax
– Larger percentages of income are taken from people with higher incomes.
Table 1 [Income Tax Paid to Federal Government]
Individual Tax Payer
• 10% on income between $0 and $8,025
• 15% on the income between $8,025 and $32,550
• 25% on the income between $32,550 and $78,850
• 28% on the income between $78,850 and $164,550
• 33% on the income between $164,550 and $357,700
• 35% on the income over $357,700
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What is taxable income?
• Taxable income = sum of all sources of a person’s income minus deductions and exemptions
• Math Equation: – All Personal Income – (Deductions + Exemptions) = Taxable Income
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What are deductions and exemptions?
• Deductions: – Money that the government
allows you to subtract from your taxable income.
• School loan interest• Mortgage interest • Donations
• Exemptions: – Money that can not be
taxed at all. • Given to people who have
children.
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So how does this all add up? • Personal Income
– $40,000
• Deductions– $3,000 mortgage interest– $650 school loan interest– $750 donations
• Total = $4,400 deductions
• Exemptions– $3,500 for one child
• Total taxable income = $32,100
– WHY IS THIS IMPORTANT???
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You get a refund!!• Original Personal Income
– $40,000• Taxed at 25%
– Should have paid $10,000 in taxes!
• True taxable income– $32,100
• Taxed at 15%
– Only have to pay $4,815 in taxes.
• Refund = $5,185
Table 1 [Income Tax Paid to Federal Government]
Individual Tax Payer
• 10% on income between $0 and $8,025
• 15% on the income between $8,025 and $32,550
• 25% on the income between $32,550 and $78,850
• 28% on the income between $78,850 and $164,550
• 33% on the income between $164,550 and $357,700
• 35% on the income over $357,700
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Trip to Bahamas
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Or Cavs floor seats Season Tickets
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Or rent your own castle for a day!
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When do you have to pay your taxes?
• April 15th of every year! – If you do not pay by
then, you have to:• File for an extension• Pay fines• Go to jail!
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What if I own a business? • If you own a business,
– You must pay a corporate income tax.
• Based on a business’s net income.
– What is net income? • Revenue (Money made) –
Expenses (Money spent).
• Makes up the 3rd largest source of revenue for the federal government.
• Example:– Apple Computers paid
$1,580,000,000 in 2008
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How much did Apple make in 2008?
• $6,210,000,000 in revenue!