Beyond the Sound Bites:
A new assessment of President Barack Obama’s budget says it underestimates future deficits by more than $2 trillion over the upcoming decade.
The Congressional Budget Office estimate says that if Obama’s February budget submission were enacted into law it would produce deficits totaling $9.5 trillion – an average of almost $1 trillion a year.
Obama’s budget foresaw deficits totaling $7.2 trillion over the same period.
The difference is chiefly because CBO has a less optimistic estimate of how much the government will take in from tax revenues, partly because the administration has rosier economic projections.
The Senate is also worried about the president’s budget numbers.
This exchange between Jeff Sessions, the Republican Senator from Alabama, and Heather Higginbottom, the new nominee for Deputy Director of OMB, is from Higginbottom’s confirmation hearing.
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Chapter 9 Sources of Government Revenue
Student Web Activity
"Understanding Individual Income Taxes"
Cf. http://www.irs.gov/individuals/article/0,,id=96623,00.html
Do You Need to File a Federal Income Tax Return?
Cf. http://www.irs.gov/faqs/content/0,,id=199873,00.html
Question: What types of educational expenses are deductible?
Cf. http://www.irs.gov/faqs/faq/0,,id=199716,00.html
Question: If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit3/chapter9/student_web_activities.html
Introduction
As you have already learned, the individual income tax is a tax on people's earnings. The tax laws should be written so that both the taxpayer and the tax collector can understand them. This task is not always easy, but people seem more willing to accept the necessity for taxes when they understand them. The purpose of this activity is to examine the taxes that are taken from your income.
Destination Title: Internal Revenue Service
Note: Clicking on the link above will launch a new browser window.
Need help using your browser for this activity? Click here for tips.
Directions
Read the article What is Taxed and Why. Print a copy of the page or read the information and answer the following questions. Answer the questions below.
Scroll down to the bottom of the page and select information for one of the jobs listed.
1. Who benefits from withholding taxes? How?
2. What is tax liability?
3. What is the difference between vertical and horizontal equity?
4. What is a tax deduction? Give examples.
5. Create a list of tax deductions and tax credits that your family may use on your next tax form.
Section 1 The Economics of Taxation
Taxes and other governmental revenues influence the economy by affecting resource allocation, consumer behavior, and the nation’s productivity and growth. The three criteria used to determine if a tax is effective are equity, simplicity, and efficiency. Furthermore, the benefit principle of taxation and the ability-to-pay principle of taxation are used to help decide the group or groups that should bear the burden of the tax. Finally, taxes can be proportional, progressive, and regressive, depending on the way the average tax per dollar changes as taxable income changes.
Content Vocabulary
sin tax
incidence of a tax
tax loophole
individual income tax
sales tax
tax return
benefit principle of taxation
ability-to-pay principle of taxation
Regressive, Flat, and Progressive Tax Chart
average tax rate
Medicare
progressive tax
marginal tax rate
regressive tax
Reading Strategy
7th
In-class assignment: with a partner, complete the graphic organizer by listing the criteria for taxes to be effective. Then define each of the criteria in your own words.
Teenage Tax Preparers
Economic Impact of Taxes
Shifting the Incidence of a Tax, p. 231
In Motion
In-class assignment
With a partner, answer the questions.
What does Panel A show?
What does Panel B show?
What is the difference of absorbing a price increase between an elastic, and an inelastic demand?
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p231.swf
Criteria for Effective Taxes
Two Principles of Taxation
Three Types of Taxes
Chapter 9 Section 1 Review
In-class assignment: with a partner, use the graphic organizer to describe the economic impact of taxes.
Entrepreneur
Profiles in Economics
Monica Garcia Pleiman
Section 2 Federal, State, and Local Revenue Systems
There are four main sources of federal government revenues. The first is the individual income tax, a progressive tax administered through a payroll withholding system. The second largest component is FICA, which is levied on employers and employees equally to pay for Social Security and Medicare. The third is borrowing by the federal government. The corporate income tax is the fourth largest source. The excise tax—a tax on the manufacture or sale of selected items such as gasoline and liquor—is the fifth-largest source of federal government revenue. Other sources of federal revenue include estate taxes, gift taxes, customs duties, and user fees. State governments receive revenues in the form of sales taxes, intergovernmental revenues, individual income taxes, and employee retirement contributions. Local governments receive funds from state and federal governments, property taxes, utility and liquor stores, sales taxes, and other sources.
Content Vocabulary
Internal Revenue Service
payroll withholding system
indexing
FICA
payroll tax
corporate income tax
excise tax
estate tax
gift tax
customs duty
user fee
intergovernmental revenue
property tax
tax assessor
natural monopoly
Reading Strategy
In-class assignment: with a partner, complete the graphic organizer to identify and describe the revenue sources for federal, state, and local governments.
Taxing Tycoons
Federal Government Revenue Sources
State Government Revenue Sources
State and Local Government Revenue Sources, p. 242
In Motion
In-class assignment: with a partner, answer the questions.
What are the sources of revenue for state and local governments?
What are the two largest revenue sources for state governments?
What are the two largest revenue sources for local governments?
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p242.swf
Local Government Revenue Sources
Case Study
Dreaded Tax Returns
Chapter 9 Section 2 Review
In-class assignment: with a partner, use a graphic organizer to list the federal government's major revenue sources.
Section 3 Current Tax Issues and Reforms
Major tax revision bills have been passed since 1980. The first reduced the progressiveness of the individual income tax and the second made it more proportional. The third, passed in 1993, made it more progressive again. The fourth, passed in 1997, provided wealthy individuals with significant tax relief for long-term investments, and provided modest tax relief for child and educational expenses. The fifth in 2001 focused on reducing the top four marginal tax brackets by significant percentages by 2006. Due to slow economic growth in 2002, the 2001 tax reform was accelerated.
Content Vocabulary
payroll withholding statement
accelerated depreciation
investment tax credit
alternative minimum tax
capital gains
flat tax
value-added tax
Examining Your Paycheck
Tax Reform
Alternative Tax Approaches
The Value-Added Tax
In-class assignment, with a partner answer the question.
Figure 9.9 The Value-Added Tax, p. 252
Economic Analysis
Is a VAT regressive, proportional, or progressive? Why?
In-class assignment: with a partner, answer the questions.
VAT, 6:26
Explain the value-added tax:
In Europe is the tax buried in the price of goods?
Is 2011 the year of a huge tax fight?
What are the pros and cons about a VAT?
Is the VAT popular in European socialist economies?
Why do some argue that a VAT is necessary?
Reading Strategy
In-class assignment: with a partner, complete a graphic organizer by listing the advantages and disadvantages of the flat tax. Include a definition of flat tax in your own words.
Business Week News Clip
Europe Circles the Flat Tax
Sec. 3 Review
In-class assignment: with a partner, use a graphic organizer to list the advantages and disadvantages of the value-added tax.
Business Week News clip
Europe Circles the Flat Tax
Chapter 9 Resources
Chapter 9: Sources of Government Revenue
Multiple Choice Quiz
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit3/chapter9/self-check_quizzes.html
Ch. 9 Crossword Puzzle
Chapter 9 Flashcards
Chapter 10: Government Spending
Chapter Overviews
Section 1: The Economics of Government Spending
The government has two types of expenditures: goods and services, and transfer payments. The government buys many goods, such as tanks, planes, ships, space shuttles, office buildings, land for parks, and capital goods for schools and laboratories. This spending affects the distribution of income and competes with the private sector for scarce resources. As a result, this spending has a large impact on the nation's economy.
Chapter 10: Government Spending
In-class assignment, with a partner, examine the budget and answer the questions.
Student Web Activity
"Understanding the Federal Budget"
Introduction
You have already learned that the federal budget is an annual plan outlining the proposed revenues and expenditures for the coming year. A good source for further information about the budget is the Citizen's Guide to the Federal Budget released by the Government Printing Office. This document is designed to provide an outline of how the government raises revenues and spends money; how the budget is enacted by the president and Congress; reasons for the budget deficit and debt; and accomplishments the president hopes to achieve with the current budget.
After you examine "The Budget," summarize the expenses in your own words.
Cf. http://www.whitehouse.gov/omb/budget
From what sources does the federal government raise revenues?
Cf. http://en.wikipedia.org/wiki/Federal_budget_%28United_States%29
What major categories of spending comprise the federal budget?
Cf. http://en.wikipedia.org/wiki/Federal_budget_%28United_States%29
Section Preview
Content Vocabulary
pork
In-class assignment, with a partner, answer the following questions.
Pork Party House: Where DC insiders go for taxpayer-subsidized fun, 6:26
What is pork legislation?
What does Citizen's Against Public Waste do?
Over the last 10 years, the Sewall-Belmont House has gotten how much in earmarks?
What are one of the "biggies?"
Sen. Mary Landrieu (D-La.) receivecd how much in the "Louisiana Purchase" for her vote on Obamacare?
Who is one legislator who is against pork?
How many times has he come to the floor, only to lose?
What is his bad behavior?
What happened after the Cunningham scandal?
Has it ended now?
public sector
private sector
transfer payment
grant-in-aid
subsidy
distribution of income
In-class assignment, with a partner, complete the graph organizer by listing reasons for the increase in government spending since the 1940s.
10.1 Strategy
p. 262, Government Spending
In-class assignment, with a partner, answer the questions.
Has government spending grown?
By how much?
Have state and local government spending increased as well?
What percentage of GDP has government spending increased over the years?
Chapter 10: Government Spending In Motion Government Spending
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p263.swf
10.1 Review
Section 2: Federal, State, and Local Government Expenditures
The president, the House of Representatives, and the Senate develop and approve the federal budget. The largest components of the federal budget are Social Security, national defense, income security, and health care services. State expenditures are intergovernmental transfers, public welfare, insurance contributions, and higher education. On a local level, the government spends money on elementary and secondary education, public utilities, hospitals, police protection, interest on debt, public welfare, and highways.
10.2 Strategy
10.2. Review
Section 3: Deficits, Surpluses, and the National Debt
Deficit spending adds to the federal national debt. The national debt affects the distribution of income and transfers purchasing power from the private to the public sector. Attempts to control the deficit have taken the form of mandated deficit targets and pay-as-you-go provisions.
Chapter 10 Resources
Chapter 10: Government Spending Multiple Choice Quiz
Chapter 10: Government Spending ePuzzles and Games Column
Chapter 10: Government Spending Vocabulary eFlashcards
Chapter 10: Government Spending In Motion The Federal Budget for Fiscal Year 2007
Chapter 10: Government Spending In Motion State and Local Expenditures
Chapters 8-11
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit3/
Neal Boortz and Banks & Shane sing "The Fair Tax Song" at the Fair Tax Rally in Columbia, SC, May 15, 2007
Email (or hand in hard copy) to gmsmith@shanahan.org.
Monday HW
1. p. 233, Reading Check; 2. p. 234, Reading Check; 3. p. 236, Reading Check.
Tuesday HW
1. p. 236, #3-5
Wednesday HW
1. p. 236, #6-8
Thursday HW
1. p. 241, Reading Check; 2. p. 243, Reading Check; 3. p. 245, Reading Check.
Friday HW
1. p. 245, #3
