ECONOMICS
GUIDED READING
CHAPTER 14: “Taxes and Government Spending”
Section 1 “What are Taxes?” pg. 359-363
1. Define:
A. Tax:
B. Revenue:
C. Tax base:
D. Individual Income Tax:
E. Sales Tax:
F. Property Tax:
G. Corporate Income Tax:
H. Proportional Tax:
I. Progressive Tax: J. Regressive Tax:
K. Incidence Tax:
1. What is the primary way that the government collects money?
Why is this important?
2. What is the income called that the government receives from taxes and other nontax sources called? . Give two examples of how government uses this money:
3. Under the U.S. Constitution what was the first power given to Congress?
4. What are two of the limits places in the taxation clause of the Constitution?
A. B.
5. When government policy makers create a new tax they must first decide what tax base
to use. List four (4) examples of a tax base:
A. B. C. D.
6. There are three (3) different tax structures, list them an give an example of each:
A.
B.
C.
7. A good tax should have four (4) basic characteristics, list them:
A.
B.
C.
D.
8. What are the two (2) theories on how to measure the fairness of a tax?
A.
B.
9. According to law of supply and demand when can producers more easily pass on the burden of a tax to consumers?
Section 2 “Federal Taxes” pg. 365-369
Define:
A. Withholding:
B. Tax return:
C. Taxable income:
D. Personal Exemption:
E. Deduction:
F. F.I.C.A.:
G. Social Security:
H. Medicare:
I. Estate Tax:
J. Gift Tax:
K. Tariff:
L. Tax incentive:
1. Explain why people pay income taxes by the “pay as you earn” system.
2. Looking at the chart on pg. 365 who pays the largest amount in income taxes?
About what percent does this group pay in the overall budget?
3. List the next two largest contributors in the tax group in order:
4. How is the individual income tax paid in most cases?
5. What is the purpose of F.I.C.A.?
6. What are the two (2) components of F.I.C.A.?
A.
B.
Section 3 “Federal Spending” pg. 371-379
Define:
A. Mandatory spending:
B. Discretionary Spending:
C. Entitlement:
D. Medicaid:
1. What is the largest single source of federal spending?
What percent of the budget does it consume?
2. What is the second largest expenditure? What percent of the budge does it consume?
3. What is the third largest? What percent of the budget does it consume?
4. How does discretionary spending differ from mandatory spending?
5. What is the largest category of discretionary spending:
A. B. C.
6. Why will Social Security programs grow in the next few years?
Section 4 “State and Local Taxes and Spending” pg. 375-380
Define:
A. Operating budget:
B. Capital budget:
C. Balanced budget:
D. Tax exempt:
E. Real property:
F. Personal property:
G. Tax assessor:
1. A state budgets pays for the day to day expenses. These include such
items as (list 2)
A.
B.
2. A state budget pays for major or investment
spending. An example would be:
3. Unlike the federal government, states have laws that require a
4. These laws however apply only to the budget, not the
budget.
5. List six (6) areas of state expenditures:
A.
B.
C.
D.
E.
F.
6. Looking at the chart on page 376 where is the largest percentage of the state revenue
spent? . What percentage is it?
7. What comprises intergovernmental revenue?
A.
B.
C.
D.
8. The largest expenditure for a state is at _ percent.
9. How much money do the 50 states now take in yearly from taxes?
10. List areas that state government can not tax because their power is limited by the
U.S. Constitution.
A.
B.
C.
D.
11. What categories of products are exempt from sales tax in most states?
A.
B.
C.
12. Who gives “local governments” their power and authority to tax and spend?
13. List four (4) major responsibilities of local government:
A.
B.
C.
D.
14. Outside of revenue the second largest source of revenue is
15. What is the difference between real property and personal property?
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