1. Citizens of the United States authorize the government, through the Constitution and elected officials, to raise money through taxes. 2. Taxation is the primary way that the government collects money. 3. Without revenue, or income from taxes, government would not be able to provide goods and services. 4. Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax. 5. The Sixteenth Amendment gives Congress the power to levy an income tax. 6. The power to tax is also limited through the Constitution. 7. The purpose of the tax must be for “the common defense and general welfare.” 8. Federal taxes must be the same in every state.
9. The government may not tax exports.
10. A tax is the income, property, good, or service that is subject to a tax. 11. A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels. 12. A progressive tax is a tax for which the percent of income paid in taxes increases as income increases. 13. A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases. 14. A good tax has the following characteristics:
15. Simplicity: Tax laws should be simple and easily understood. 16. Economy: Government administrators should be able to collect taxes without spending too much time or money. 17. Certainty: It should be clear to the taxpayer when the tax is due, how much is due, and how it should be paid. 18. Equity: The tax system should be fair, so that no one bears too much or too little of the tax burden. 19. To fully evaluate the fairness of a tax, it is important to think about who bears the burden of the tax. The incidence of a tax is the final burden of the tax. 20. If demand is inelastic, a tax will increase the price of a good and consumers will bear a large burden of...