U3L1 - Intro to Taxes

U3L1 -
Intro to Taxes

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Where'd All My Money Go?

Open Ended

What are taxes and why do we pay them?

Beyond income taxes, the U.S. has a diverse landscape of other taxes. Review the infographic to learn more. Then, answer the questions on the following slides.

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Types of Taxes in the US

Open Ended

Select one of the types of taxes in the infographic. Describe a time when you observed this type of tax being used.

Open Ended

Do you think the types of taxes in this infographic have an effect on people’s behavior and financial decision making? Explain why or why not.

Match

Match each tax system to its correct definition.

• All taxpayers pay the same fraction of their income as tax, regardless of how much money they earn. The tax rate remains constant and does not change with income levels.

• High-income earners pay a smaller fraction of their income than those with lower income. The tax burden decreases as the income of the taxpayer increases.

• High-income taxpayers pay a larger fraction of their income than taxpayers with a lower income. The tax rate increases as the income grows.

Proportional

Regressive

Progressive

• Proportional

• Regressive

• Progressive

Multiple Choice

Which of these systems do you think is used in the U.S.?

• Progressive

• Regressive

• Proportional

Open Ended

Which of these systems do you think is the most fair and/or effective? Why?

Multiple Choice

2. Which statement BEST describes marginal tax rates?

• 1. Your income is taxed at the highest rate that applies to your income amount (e.g. all of your income is taxed in the highest pocket)

• 1. Your income is equally split among the tax brackets (e.g. divide your income by # of brackets and apply the rates of each tax bracket)

• 1. Your income is always taxed at the lowest rate of that tax year (e.g. all of your income is placed and taxed in the first pocket)

• 1. Your income may fall into more than one tax bracket, so more than one tax rate can apply (e.g. fill up the first pocket and then move to the next pocket)

Multiple Choice

A tax deduction...

• 1. LOWERS a person's tax liability by LOWERING their taxable income

• 1. INCREASES a person's tax liability by LOWERING their taxable income

• 1. INCREASES a person's tax liability by INCREASING their taxable income

• 1. has no impact on the amount of taxes a person pays

Multiple Choice

3. Which of the following statements describes the CORE misconception addressed in this video?

• 1. The standard deduction reduces your tax liability

• 1. Portions of your income are taxed at different rates, called marginal tax rates

• 1. When the government wants to increase tax rates, it is usually referring to the rates for the highest tax brackets

• 1. The tax rate of the highest tax bracket your income falls into is applied to your whole income

What is Adjusted Gross Income?

It’s important to understand that some of your income is not subject to tax at all. Your adjusted gross income (AGI), also known as taxable income, is an important figure when it comes to finding out how much tax you owe. Read the article on the next slide to learn more. Then, answer the questions that follow.

Definition of adjusted gross income | Internal Revenue Service

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Open Ended

1. In your own words, explain the difference between gross income and adjusted gross income (AGI).

Open Ended

Why do you think certain types of expenses, like educator expenses or student loan interest, are allowed as adjustments to income?