1 chapter introduction 2 chapter objectives explain the economic impact of taxes. list three...

1

Chapter Introduction 2

Chapter Objectives

• Explain the economic impact of taxes.

• List three criteria for effective taxes. • Understand the two primary principles of

taxation.

• Understand how taxes are classified.

Section 1: The Economics of Taxation

Click the mouse button or press the Space Bar to display the information.

2


Chapter Objectives

• Explain the progressive nature of the individual income tax.

• Describe the importance of the corporate tax structure.

• Identify other major sources of federal revenue.

Section 2: The Federal Tax System


3


Chapter ObjectivesSection 3: State and Local Tax Systems


• Explain how state governments collect taxes and other revenues.

• Differentiate between state and local revenue systems.

• Interpret paycheck deductions.

4


Chapter ObjectivesSection 4: Current Tax Issues


• Describe the major tax reforms since 1980.

• Debate the advantages and disadvantages of the value-added tax.

• Explain the features of a flat tax.

• Discuss why future tax reforms will occur.

End of Chapter Introduction

Click the mouse button to return to the Contents slide.

6

Section 1-1

Study GuideMain Idea

Taxes are the single most important way of raising revenue for the government.

Reading StrategyGraphic Organizer As you read the section, complete a graphic organizer similar to the one on page 223 of your textbook by listing the criteria for taxes to be effective. Then, define each of the criteria in your own words.

Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 223 of your textbook.

7

Key Terms

– tax loophole

– individual income tax

– sales tax

– sin tax

Section 1-2

Study Guide (cont.)


– progressive tax

8

Section 1-4


Introduction

• An enormous amount of money is required to run the federal, state, and local governments of the United States.

Why are we taxed?

9

Section 1-5


Introduction (cont.)

Figure 9.1

10

Section 1-7


Resource Allocation• The factors of production are affected

whenever a tax is levied.

• A tax placed on a good or service at the factory raises the cost of production, which shifts the supply curve to the left.

• If demand remains unchanged, what happens to the price of the procuct?

• If demand remains unchanged, the equilibrium price of the product goes up.

• What, then happens to demand?

• People react to the higher price in a predictable manner–they buy less.

If taxes are placed on business, what happens to production?

11

Section 1-8


Behavior Adjustment• Often taxes are used to encourage or

discourage certain types of activities.

• The so-called sin tax – a relatively high tax designed to raise revenue and reduce consumption of a socially undesirable product – is an example of how a tax can be used to change behavior.

12

Section 1-13


Criteria for Effective Taxes• Some taxes will always be needed, so we

want to make them as effective as possible.

• To do so, taxes must meet criteria: they must be equitable, simple, and efficient.

13

Section 1-14


Equity• The first criterion is equity or fairness.

• There is no overriding guide that we can use to make taxes completely equitable.

• However, it does make sense to avoid tax loopholes – exceptions or oversights in the tax law that allow some people and businesses to avoid paying taxes.

• Taxes generally are viewed as being fairer if they have fewer exceptions, deductions, and exemptions.

14

Section 1-15


Simplicity• Tax laws should be written so that both the

taxpayer and the tax collector can understand them.

• The individual income tax – the tax on people’s earnings – is a prime example of a complex tax.

• The hardest thing in the world to understand is the income tax.

•Albert Einstein

• A sales tax – a general tax levied on most consumer purchases – is much simpler.

15

Section 1-20


Types of Taxes• Three general types of taxes exist in the

United States today - proportional, progressive, and regressive.

• Each type of tax is classified according to the way in which the tax burden changes as income changes.

• A progressive tax is a tax that imposes a higher percentage rate of taxation on persons with higher incomes.

16

Note: These tax rate schedules are provided for tax planning purposes. To compute your actual income tax, please see the 2006 instructions for Form 1040, 1040A, or 1040EZ as appropriate.

Single Filing Status

• 10% on income between $0 and $7,550

• 15% on the income between $7,550 and $30,650; plus $755.00

• 25% on the income between $30,650 and $74,200; plus $4,220.00



• 35% on the income over $336,550; plus $97,653.00

17

Section 1-21


Types of Taxes (cont.)

• Progressive taxes usually use a marginal tax rate, the tax rate that applies to the next dollar of taxable income, which increases as the amount of taxable income increases.

• A proportional tax imposes the same percentage rate of taxation on everyone, regardless of income.

18

Section 1-22


Types of Taxes (cont.)

• A regressive tax is a tax that imposes a higher percentage rate of taxation on low incomes than on high incomes.

Figure 9.3

End of Section 1


20

Section 2-2


Key Terms

– Internal Revenue Service (IRS)

– tax return

– indexing

– FICA

– medicare

– payroll tax

– payroll withholding system

Study Guide (cont.)

– corporate income tax

– excise tax

– luxury good

– estate tax

– gift tax

– customs duty

– user fee

21

Section 2-4


Introduction• The federal government collects taxes from

a number of sources.

• The most important sources of government revenue are individual income taxes, Social Security taxes, and corporate income taxes.

22

Section 2-5


Individual Income Taxes• In 1913 the Sixteenth Amendment to the

United States Constitution was ratified, allowing Congress to levy an income tax.

• Since then, the federal government has relied heavily on the individual income tax–the tax on people’s earnings–to finance its operations.

• The federal government collected about 48 percent of its total revenue from taxes on people’s earnings.

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Section 2-6

Individual Income Taxes (cont.) Figure 9.4

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Section 2-7


Payroll Deductions• In most cases, the individual income tax is

paid over time through a payroll withholding system.

• This is a system that requires an employer to automatically deduct income taxes from an employee’s paycheck and send it directly to the government.

• The agency that receives the tax payment is the Internal Revenue Service (IRS), the branch of the U.S. Treasury Department in charge of collecting taxes.

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Section 2-8


Payroll Deductions (cont.)

• After the close of the tax year on December 31, and before April 15 of the following year, the employee files a tax return.

• This is an annual report to the IRS summarizing total income, deductions, and the taxes withheld by employers.

• People who are self-employed are required to send quarterly estimates of their taxes to the Internal Revenue Service.

• These individuals must also make a final settlement for the previous year sometime before April 15.

26

Section 2-9


A Progressive Income Tax• The individual income tax is a progressive

tax.

• According to individual tax tables, single individuals paid 15% to 39.6% depending on income.

Figure 9.5

27

Section 2-10


A Progressive Income Tax (cont.)

• When a tax is progressive, the average tax rate goes up when income goes up.

Figure 9.6

28

Section 2-12


FICA• The second most important federal tax is

FICA.

– FICA is the Federal Insurance Contributions Act tax levied on both employers and employees to pay for Social Security and medicare.

– Medicare is a federal health-care program available to all senior citizens, regardless of income.

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Section 2-14


Social Security Taxes• In 2000 the Social Security component of

FICA was 6.2 percent of wages and salaries up to $76,200.

• Because the Social Security tax is capped, it is proportional up to $76,200 and regressive thereafter.

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Contribution and benefit bases, 1937-2009

Year Amount Year Amount Year Amount

1937-50 $3,000 1981 $29,700 1996 $62,700

1951-54 3,600 1982 32,400 1997 65,400

1955-58 4,200 1983 35,700 1998 68,400

1959-65 4,800 1984 37,800 1999 72,600

1966-67 6,600 1985 39,600 2000 76,200

1968-71 7,800 1986 42,000 2001 80,400

1972 9,000 1987 43,800 2002 84,900

1973 10,800 1988 45,000 2003 87,000

1974 13,200 1989 48,000 2004 87,900

1975 14,100 1990 51,300 2005 90,000

1976 15,300 1991 53,400 2006 94,200

1977 16,500 1992 55,500 2007 97,500

1978 17,700 1993 57,600 2008 102,000

1979 22,900 1994 60,600 2009 106,800

1980 25,900 1995 61,200

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Section 2-15

Social Security Taxes (cont.)

Figure 9.6

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Section 2-16


Medicare• In 1965 Congress added medicare to the

Social Security program.

• More than 30 million senior citizens participate in medicare.

• The basic plan pays a major share of an eligible person's total hospital bills.

• The medicare component of FICA is taxed at a flat rate of 1.45 percent with no income cap.

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Section 2-17


Corporate Income Taxes• Corporations as well as individuals must

pay income taxes.

• The third largest category of taxes the federal government collects is the corporate income tax – the tax a corporation pays on its profits.

• The corporation is taxed separately from individuals because the corporation is recognized as a separate legal entity.

• Several marginal tax brackets, which are slightly progressive, are placed on corporations.

34

Section 2-18

Other Federal Taxes• In addition to income, FICA, and corporate

taxes, the federal government receives revenue in the form of excise taxes, estate and gift taxes, and customs duties.

35

Section 2-19


Excise Taxes• The excise tax – a tax on the manufacture

or sale of selected items, such as gasoline and liquor – is the fourth largest source of federal government revenue.

• Some early targets of excise taxes were carriages, snuff, and liquor.

• In 1991 Congress expanded the excise tax to include certain luxury goods.

36

Section 2-20


Excise Taxes (cont.)

• An economic product is called a luxury good (or service) if the demand for the good rises faster than income when income grows.

• At first, the 19 percent luxury tax was indexed to keep up with inflation and was applied to many goods.

• The tax was unpopular, however, so boats, aircraft, jewelry, and furs were dropped in 1993.

• Later, Congress decided to phase out the luxury tax by the year 2002.

37

Section 2-21


Estate and Gift Taxes• An estate tax is the tax the government

levies on the transfer of property when a person dies.

• Estate taxes can range from 18 to 55 percent of the value of the estate.

• The gift tax is a tax on donations of money or wealth and is paid by the person who makes the gift.

• The estate tax and the gift tax are progressive taxes–the larger the estate or gift, the higher the tax rate.

38

Section 2-22


Customs Duties• A customs duty is a charge levied on

goods brought in from other countries.

• The Constitution gives Congress the authority to levy customs duties.

• Congress, in turn, has given the president authority by executive order to raise or lower the existing tariff rates by as much as 50 percent.

• Many types of goods are covered, ranging from automobiles to silver ore.

39

Section 2-23


Miscellaneous Fees• Finally, about 1.9 percent of federal

revenue is collected through various miscellaneous fees.

• Since the 1980s user fees – charges levied for the use of a good or service –have been suggested with increasing frequency.

• These fees include entrance charges you pay to visit national parks, as well as the fees ranchers pay when their animals graze on federal land.

End of Section 2


41

Section 3-10

Other Revenues (cont.)

Figure 9.7

42

Section 3-12

Local Government Revenue Sources• The major sources of local government

revenue also include taxes and funds from state and federal governments. Figure 9.7

End of Section 3


44

Section 4-4

Introduction• The complexity of our tax code is not

accidental: it is the result of adjustments and amendments by Congress to both influence and reward behavior.

45

Section 4-5


Tax Reform in the 1980s and 1990s• Tax reform has received considerable

attention in recent years.

• This is due to more changes in the tax code, and more changes in direction, than at any time in our nation’s history.

46

Section 4-6


Tax Reform in 1981• When Ronald Reagan was elected

president in 1980, he believed that high taxes were the main stumbling block to economic growth.

• He proposed the Economic Recovery Tax Act of 1981, which substantially reduced taxes for individuals and businesses.

• Businesses also got tax relief in the form of accelerated depreciation–larger than normal depreciation charges–which allowed firms to reduce federal income tax payments.

47

Section 4-8


Tax Reform: 1986, 1993• By the mid-1980s, the idea that the tax

code favored the rich and powerful was gaining momentum.

• In 1986 Congress passed the most sweeping tax reform act since income taxes were enacted in 1913.

– It ended the traditionally progressive individual income tax structure by reducing the 16 marginal tax brackets to two brackets.

– A 5 percent surcharge–or additional tax above and beyond the base rate–was added to bring the top bracket to 31 percent.

48

Section 4-9


Tax Reform: 1986, 1993 (cont.)

• The law also made it difficult for the very rich to avoid taxes altogether.

• The alternative minimum tax–the personal income rate that applies whenever the amount of taxes paid falls below some designated level–was strengthened.

• The reform act also shifted about $120 billion of taxes from individuals to corporations over a five-year period.

49

Section 4-10


• The Omnibus Budget Reconciliation Act of 1993 was driven more by the need for the government to balance its budget than to overhaul the tax brackets.

• As a result, the law added the two top marginal tax brackets of 36 and 39.6 percent.

Tax Reform: 1986, 1993 (cont.)

50

Section 4-11


Tax Reform in 1997• In 1997 the largest tax reduction since the

1981 act was passed.

• On the economic side, the government found itself with unexpectedly high tax revenues in 1997.

• On the political side, the balance of power had dramatically shifted in the 1996 elections.

• The tax on capital gains – profits from the sale of an asset held for 12 months – was reduced from 28 to 20 percent.

51

Section 4-12


Tax Reform in 1997 (cont.)

• The tax reductions reflected the “family-friendly” theme of the 1996 elections.

• Tax credits of $500 per child and other deductions for educational expenses were included in the legislation.

• In the end, an analysis by the United States Treasury Department determined that nearly half of the benefits went to the top 20 percent of wage and income earners.

• With all its categories, the 1997 federal tax law became the most complicated ever.

52

Section 4-13


Changing Tax Law• Some people want to change the personal

income tax; others want to scrap it altogether.

53

Section 4-15

The Concept of Value Added (cont.)

Figure 9.10

54

Section 4-18

The Flat Tax• The concept of a flat tax – a proportional

tax on individual income after a specified threshold has been reached – received attention in the 1996 presidential elections.

55

Section 4-19


A “Progressive” Flat Tax?• A pure flat tax would tax all income at a

specific rate, such as 15 or 20 percent.

• A flat tax can be progressive as long as some income is exempted.

56

Section 4-20


Advantages of the Flat Tax• The primary advantage of the flat tax is the

simplicity it offers to the taxpayer.

• A second advantage is that a flat tax closes or minimizes most tax loopholes.

• A third advantage is that a flat tax reduces the need for tax accountants, tax preparers, and even large portions of the IRS.

• Overall, the savings to everyone could be as high as $100 billion annually.

57

Section 4-5


Disadvantages of the Flat Tax• The first disadvantage of the flat tax is that

it removes many of the behavior incentives already built into the tax code.

• The current tax code allows homeowners to deduct interest payments on home mortgages. A flat tax would not.

• The flat tax will benefit those with high incomes more so than those with lower incomes.

• Any flat tax, regardless of the size of the up-front exemption, is a dramatic shift away from the ability-to-pay principle of taxation.

End of Section 4


59

Chapter Summary 1

Section 1: The Economics of Taxation


• Taxes affect the allocation of resources, behavior, and economic growth.

• The incidence of a tax, or final burden of a tax, is affected by elasticity–when demand for a product is elastic, less of the tax can be shifted to the buyer; more can be shifted when demand is inelastic.

• Equity, simplicity, and efficiency are the criteria used to judge the effectiveness of a tax.

60

Chapter Summary 2


Section 1: The Economics of Taxation (cont.)

• Two principles, the benefit principle of taxation and the ability-to-pay principle of taxation, have been used to help select the group or groups that bear the burden of the tax. Both involve value judgments, and both types of taxes are widely used today.

• Taxes can be placed into three groups– proportional taxes, progressive taxes, and regressive taxes–depending on the way in which the tax burden changes as income changes.

61

Chapter Summary 3


Section 2: The Federal Tax System

• The main source of revenue for the federal government is the individual income tax.

• Indexing is used to change the marginal tax rates to offset the effects of inflation.

• The second largest revenue source is the FICA tax, collected to cover Social Security and medicare.

• The corporate income tax is the third largest source of federal revenue.

• Other sources of federal revenue include excise taxes, gift taxes, customs duties, and user fees, which is a different name for a benefit tax.

62

Chapter Summary 5


Section 3: State and Local Tax Systems

• Intergovernmental revenues are the largest source of state revenues.

• Local governments receive intergovernmental revenues from state and federal governments. Local governments also raise revenue from property taxes, utility and liquor store sales, sales taxes, and other sources.

• The payroll withholding statement attached to a person’s weekly, biweekly, or monthly paycheck provides a summary of wages, taxes, and other withholdings.

63

Chapter Summary 7


Section 4: Current Tax Issues

• A value added tax (VAT) is a tax on consumption rather than income. It is built into a product’s every stage of production, is largely invisible, is regressive, and can raise huge sums.

• The Economic Recovery Tax Act of 1981 lowered marginal tax rates for all levels of income, and added accelerated depreciation and the investment tax credit for businesses.

• The 1986 tax reform law closed tax loopholes opened in 1981, and reduced the individual income tax code to two brackets, making it more proportional.

64

Chapter Summary 8


Section 4: Current Tax Issues (cont.)

• The Budget Deficit Reduction Act of 1993 added two marginal tax brackets, restoring the progressive nature of the tax removed in 1986.

• The Taxpayer Relief Act of 1997 provided the wealthy with long-term investment tax breaks, and provided modest tax relief for individuals with child and educational expenses.

• Flat tax proposals can be mildly progressive, but in general reject the ability-to-pay principle of taxation.

End of Chapter Summary


66

___ annual adjustment of tax brackets to keep pace with inflation

___ average tax per dollar decreases as taxable income increases

___ average tax per dollar increases as taxable income increases

Click the mouse button or press the Space Bar to display the answer. The Chapter Assessment is on pages 252–253.

Chapter Assessment 1

Identifying Key TermsMatch the letter of the term best described by each statement.

F

J

H

A. ability-to-pay H. progressive taxB. corporate income tax I. proportional taxC. estate tax J. regressive taxD. excise tax K. sales taxE. FICA L. sin taxF. indexing M. VATG. individual income tax

67


Click the mouse button or press the Space Bar to display the answer.

Identifying Key Terms (cont.)

Match the letter of the term best described by each statement.

___ average tax per dollar unchanged as taxable income rises

___ designed to discourage consumption of socially undesirable goods or services

___ tax on the manufacture or sale of certain items

I

L

D


68






___ largest source of revenue for the federal government

___ large source of revenue for state governments

___ national sales tax on value added at each stage of production

G

K

M

69






___ Social Security and medicare taxes

___ tax on the transfer of property when a person dies

___ tax paid by those who can most afford to pay

___ third largest source of income for the federal government

E

C

A

B

70



Describe how taxes can be used to affect people’s behavior.

A heavy tax can be imposed on a product to limit consumption of that product.

Reviewing the Facts

71



Illustrate, using supply and demand curves, how the burden of a tax can be shifted.

Answers will vary.

Reviewing the Facts (cont.)

72




Explain the three criteria used to evaluate taxes.

equity–taxes should be just and impartial; simplicity–tax laws should be easily understood; efficiency– taxes should be relatively easy to administer

73




Name the two principles of taxation.

benefit principle, ability-to-pay principle

74




Describe the main features of the individual income tax.

It is a progressive tax on people’s earnings, collected through payroll withholding system and sent directly to the government.

75




Identify the two components of FICA.

Social Security taxes, medicare

76




Describe the corporate income tax.

the tax a corporation pays on its profits

77




Distinguish between excise taxes, estate and gift taxes, and customs duties.

excise taxes–taxes on manufacture or sale of certain items; estate taxes– levied on transfer of property when a person dies; gift taxes–levied on donations of money or wealth; customs duties–levied on goods brought in from other countries

78




Identify the main sources of revenue for state governments.

sales taxes, intergovernmental revenues, individual income taxes, employee retirement contributions

79




List the main sources of revenue for local governments.

intergovernmental revenues, property taxes, utilities and liquor stores, sales taxes

80




Identify the main types of taxes that are normally withheld from a worker’s paycheck.

federal income tax, state income tax, city income tax, FICA taxes

81




Describe the four major tax reform bills enacted since 1980.

Economic Recovery Tax Act of 1981, tax reform law of 1986, Omnibus Budget Reconciliation Act of 1993, Taxpayer Relief Act of 1997

82




List the advantages and disadvantages of a VAT.

adv: hard to avoid, incidence of tax widely spread, not visible to consumer, easy to collect, small tax can raise large revenue; disadv: invisible to consumers, might compete with state sales taxes

83




Identify the income group that will receive the most benefit under a flat tax.

individuals with high incomes

84




Explain why future tax reforms are inevitable.

because of the complexity of the tax code, the record tax collections in the 1990s, the abruptness of political changes

85



Thinking Critically

Synthesizing Information If you were an elected official who wanted to increase tax revenues, which of the following taxes would you prefer to use: individual income, sales, property, corporate income, user fees, VAT, or flat? Provide reasons for your decision.

Answers will vary.

86



Thinking Critically (cont.)

Making Comparisons Distinguish between the benefit and the ability-to-pay principles of taxation. Use a web like the one on page 253 of your textbook to help you organize your answer.

Answers will vary.

87



Applying Economic Skills

User Fees In your own words, prepare the rationale for a user fee that you think should be enacted.

user fee’s burden on the individual

88



Applying Economic Skills (cont.)

Sales Taxes Some people object to state and local governments imposing sales and property taxes. What would you say to these people in defense of the two taxes?The sales tax is relatively cheap to administer and, because it applies to so many, raises huge amounts of revenue; many public services enable people to maintain and improve their property value, so value of that property should be subject to taxation.

89



Applying Economic Skills (cont.)

Flat Taxes Evaluate the concept of a flat income tax using the three criteria for effective taxes. Write a brief summary of your support or opposition to such a proposal.

A flat tax is a proportional tax on individual income after a specified threshold has been reached; answers should consider equity, simplicity, and efficiency of a flat tax.

90


The government decides to fight air pollution by cutting back on the amount of gasoline used in the country. A one-dollar-per-gallon tax is to be imposed on gasoline. Should this tax be placed on the oil companies or on the consumers? Explain. Answers will vary.


End of Chapter Assessment


Economic Concepts 1

Focus Activity 1.1

Continued on next slide.

Focus Activity 1.2

Focus Activity 2.1


Focus Activity 2.2

Focus Activity 3.1


Focus Activity 3.2

Focus Activity 4.1


Focus Activity 4.2

Extra Credit Project

Create a television-viewing log for news items concerning government and the economy–with specific reference to taxation. Record the date, the subject of the item, and the length of time given to the item. When study of the chapter is completed, compare and discuss your logs with the class.

Economics Online

Explore online information about the topics introduced in this chapter.

Click on the Connect button to launch your browser and go to the Economics: Principles and Practices Web site. At this site, you will find interactive activities, current events information, and Web sites correlated with the chapters and units in the textbook. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http://epp.glencoe.com

BusinessWeek Online

Explore online information about the topics introduced in this chapter.

Click on the Connect button to launch your browser and go to the BusinessWeek Web site. At this site, you will find up-to-date information dealing with all aspects of economics. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http://www.businessweek.com

Infobyte 1

Taxable Income Taxable income is the amount of income that is subject to taxation by the state and federal government. It is the adjusted gross income of wages, salaries, dividends, interest, capital gains, etc., less allowable adjustments deductions, which include but are not limited to contributions to retirement accounts, business expenses, and capital losses.

GE 1.1

Taxes Around the World If each student were to ask 10 people the question, “Do you pay too much in taxes?” the vast majority of responses would be in the affirmative. A recent study suggests, however, that Americans are among the least taxed people in the industrialized world. In the United States all taxes account for about 30 percent of gross domestic product (GDP). Of the world's 24 wealthiest nations, only Turkey and Australia collect a smaller percentage of GDP in taxes. Most leading industrialized nations pay close to 40 percent. The study concluded that taxes in the United States could be raised substantially and the country would still remain among the least taxed nations.

Canadian Tax System

High Taxes? Are You Sure?

GE Contents 4

Click on a hyperlink to choose that topic.

Canadian Tax System The federal government of Canada collects a federal income tax as well as provincial income taxes for nine of its provinces. The provincial income tax from each province equals a percentage of its federal income tax. Only Quebec collects its own taxes according to its own rates.

GE 4.1

High Taxes? Are You Sure? Individual income taxes are the main source of revenue for the Canadian government. Rates in Canada’s progressive individual income tax system range from 6 percent to 34 percent. Another major source of revenue is the corporate income tax. Canadian corporations are supposed to pay 46 percent of their income in taxes but as a result of deferments and credits, seldom pay the full amount.

GE 4.2

The effect of a tax depends on the elasticities of the demand and supply curves.

FYI 1.1

Taxpayers send their income tax returns to one of the IRS’s 10 tax-processing centers. These centers receive and process around 200 million returns and other related documents each year. Using computers, IRS staff members quickly check each return. A small percentage of each year’s returns are selected for audit–a more thorough examination. The IRS also investigates suspected violations of the tax laws.

FYI 2.1

Cybernomics 1.1

Electronic Tax Forms Income-tax payers who once picked up tax forms at the library or the local accountant’s office can now stay home and order a Federal Tax Products CD-ROM on the Internet. The CD contains current year tax forms, including forms that may be filled in and filed electronically.

Cybernomics 4.1

Charitable Web Sites Suppose the flat tax on income becomes a reality? Will more people go hungry if taxpayers can no longer deduct charitable contributions? Not if Web sites such as the Hunger Site catch on. For each click, the United Nations World Food Program receives three cups of rice, maize, or other staples. The user pays nothing. A corporate sponsor pays for the food in exchange for the opportunity to flash its logo on the screen after each donation.

BW Newsclip 1


The Sixteenth Amendment, which gives Congress the power to tax people’s incomes to generate revenue for the federal government, was added to the Constitution in 1913. Today, taxes are placed on income, sales, and property to raise money for services such as transportation and education.

Read the BusinessWeek Newsclip article on page 243 of your textbook.

Do Taxes Spell Good News?

This feature is found on page 243 of your textbook. Click the Speaker button to listen to an audio introduction.


BW Newsclip 2


Making Inferences How would having negative monthly savings rates imply that taxes are too high?

Negative monthly savings rates imply that too much income was taken in taxes, forcing households to use savings to pay monthly bills.

Click the mouse button or press the Space Bar to display the answer. This feature is found on page 243 of your textbook.



BW Newsclip 3

Drawing Conclusions Do you agree with Paul Kasriel’s opinion about taxes and lower savings rates? Why or why not?

Answers will vary.

NBR 1.1

• Define budget deficit, surplus, and balanced budget. • Describe how the government finances budget deficits. • Outline the different points of view on the 1999 budget

agreement.

After viewing How the Government Spends, Collects, and Owes, you should be able to:

Economics and YouVideo 15: How the Government

Spends, Collects, and Owes



NBR 1.2

Side 2Disc 1

Chapter 15

Click the Videodisc button anytime throughout this section to play the complete video if you have a videodisc player attached to your computer.

Click the Forward button to view the discussion questions and other related slides.




Click inside this box to play the preview.

NBR 1.3

Side 2Disc 1

Chapter 15




What is the difference between a budget deficit and a budget surplus?

In a budget deficit, the federal government spends more in a year than it receives in revenue and taxes. In a budget surplus, the government takes in more money than it spends.

SWS 1


Your teacher has assigned a major research report, so you go to the library. As you wander the aisles surrounded by books, you wonder: Where do I start my research? Which reference works should I use?

This feature is found on page 230 of your textbook.

Using Library Resources

SWS 2


Learning the Skill


• Libraries contain many resources. Here are brief descriptions of important ones:

• Reference Books Reference books include encyclopedias, biographical dictionaries, atlases, and almanacs.

Click the mouse button or press the Space Bar to display the information. This feature is found on page 230 of your textbook.

– An encyclopedia is a set of books containing short articles on many subjects arranged alphabetically.

SWS 3


Learning the Skill (cont.)


– A biographical dictionary includes brief biographies listed alphabetically by last names.

– An atlas is a collection of maps and charts for locating geographic features and places. An atlas can be general or thematic.

– An almanac is an annually updated reference that provides current statistics and historical information on a wide range of subjects.


SWS 4




• Card Catalogs Every library has a card catalog, either on cards or computer or both, which lists every book in the library. Search for books by author, subject, or title. Computerized card catalogs will also advise you on the book’s availability.

• Periodical Guides A periodical guide is a set of books listing topics covered in magazines and newspaper articles.


SWS 5




• Computer Databases Computer databases provide collections of information organized for rapid search and retrieval. For example, many libraries carry reference materials on CD-ROM.

• Internet Libraries can often suggest clearinghouse sites, online databases, and other reputable sites.


SWS 6


Practicing the Skill


• Suppose you are assigned a research report dealing with the introduction of the U.S. income tax. Read the questions on the following slides, then decide which of the sources described above you would use to answer each question and why.


SWS 7




almanac

During which year was the federal income tax established?

SWS 8



encyclopedia

What was the purpose of the income tax when it was introduced in 1913?


SWS 9



encyclopedia or card catalog

How did the public react to the tax?

Profiles in Economics 1.1



Janet Yellon 1946–

Alice Rivlin 1931–

Click a picture to learn more about Janet Yellon or Alice Rivlin. Be prepared to answer the questions that appear on the next two slides.


Making Comparisons Compare and contrast the work and views of Yellen and Rivlin.

Similarities: Both economist lead important federal economic agencies, both are critical to federal deficit spending, and both focus on macro-economic issues. Differences: Yellen’s top priority is balancing the federal budget, and Rivlin is a strong critic of the budget.





Synthesizing Information What significance is there in the fact that both Yellen and Rivlin are women?

Their success belies discriminatory attitudes.

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1 chapter introduction 2 chapter objectives explain the economic impact of taxes. list three...

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