sillllllying Flashcards
The Internal Revenue Service (IRS)
a. Enforcing the tax law
b. Collecting taxes
c. Processing tax returns
d. Issuing tax refunds
16th Amendment
Established Congress’s right to impose a Federal income tax
Revenue Act
signed by President Woodrow Wilson, it provided a progressive tax structure
Higher income earners pay higher rates
FICA
- Payroll Tax (FICA) – payroll tax imposed on both federal employees and employers to fund Social Security and Medicare
a. Social Security benefits include old-age, survivors and disability insurance (created during the New Deal)
- The current FICA rate is 7.65%
- Medicare provides hospital insurance benefits for the elderly
Progressive Tax
takes a larger percentage of income from high-income groups than from low-income groups and is based on the concept of ability to pay.
Adjusted Gross Income (AGI)
your gross income minus specific
reductions
“write offs”
W4, W2
Once you are hired, you fill out a W-4 form, which
lists all withholding information
a. Ex) Number of dependents, child care expenses
Toward the end of the year, the company you work
for sends you a W-2 form
a. This form details how much money was made the
previous year and how much federal tax was withheld
debt
The United States debt is the
amount owed by the federal
government.
Deficit
The federal deficit is when the
amount of spending exceeds the
level of income.
Mandatory Spending
government spending
that is required by law
and not subject to annual
limits.
b. the amount spent on
mandatory programs is
based on formulas
already written into law.
c. it is not decided upon
on yearly basis.
Discretionary spending
a. the portion of federal
government spending that is decided
upon by Congress each year.
b. it is usually divided into two
categories: defense and non-defense.
c. the non-defense categories
consist of healthcare, education,
welfare, transportation, and
pensions, etc.
d. the largest percentage of
spending is given to healthcare.
non-defense
non-defense categories
consist of healthcare, education,
welfare, transportation, and
pensions, etc.
Contractionary Spending
a. enacted by the government to reduce the money
supply and the spending in the country.
b. This is done primarily through increasing
interest rates.
deficit spending
When the government
continues to spend money that it
doesn’t have
Expansionary Spending
a. expanding the money supply to encourage
economic growth.
b. this is done through lowering interest rates,
offering rebates, and government spending.
Causes of the recession
a. The Federal Reserve Bank offered very low interest
rates for mortgages.
b. Banks were offering loans and mortgages to
anyone,
even those considered “high risk”. (subprime
lending)
c. As a result, the demand for houses skyrocketed.
d. As people began buying houses, the value of these
homes increased dramatically.
“opening the window”
When the country is in
economic crisis, The Fed will
lower interest rates to
encourage spending and
borrowing.
subprime lending
Banks were offering loans and mortgages to
anyone, even those considered “high risk”.
TARP (Troubled Assets Relief Program)
they gave over $900
billion plus interest to
banks to save them from
failing.
c. many were upset and
believed the banks should
be held accountable for
issuing high risk loans.
Obama’s Stimulus Plan
Results of the Great Recession
- The Gross Domestic
Product fell by 4.3% - This was the longest lasting
recession in American history
– 18 months. - The unemployment rate
rose to 10%. - The recession ended in June
of 2009 but economic issues
continued for years. - Republicans believed
Obama’s stimulus plan did
little to end the recession.
