What Is The Central Conflict In The Relationship Between Taxation And Government Services

Purpose

To help students understand the role of taxes in the market economy

Objectives

Students will be able to

define market place economy and explain the part that taxes play in it.
describe the impact of government spending on the economic system.

Background

The United States has a market place economy-an economic system based on free enterprise.

In a market economy, money moves from the consumer to businesses when consumers purchase goods and services. The government relies on taxation revenue from the market place economy.

Businesses pay sales tax, based on the buy toll of the appurtenances. Other taxes include corporate income tax, based on business profits. In full general, when a business'due south sales abound, so do its tax payments.

Taxpayers pay income taxes and payroll taxes to the federal government and may also pay income revenue enhancement to state and local governments. Generally, the greater the income, the more a taxpayer will pay. Taxpayers pay sales taxes on goods purchased.

The government impacts the economic system through the appurtenances and services it purchases and provides. About one-third of the nation's economic system is based on government spending. Most acquirement for government spending comes from the collection of taxes.

When the economy is growing, consumers earn more than and make more purchases. This increases business profits and boosts sales and corporate income tax acquirement. Consumers may purchase bigger homes (thus increasing revenue from property taxation), travel more than (thus increasing revenue from gasoline taxation), and then on. In this fashion the government collects more taxes and has more money available to spend.

Key Terms

market economy

An economic system based on individual enterprise that rests upon three basic freedoms: freedom of the consumer to choose among competing products and services, freedom of the producer to starting time or aggrandize a business, and freedom of the worker to choose a job and employer.

Opening the Lesson

Explicate the difference between a consumer and a producer. A consumer is i who uses appurtenances or services and a producer is ane who makes or provides appurtenances or services or owns the resource that do and so.

Inquire students:

When have you lot been a consumer? Answers volition vary. One example may be shopping for clothes.
When have you lot acted as producers? Student answers volition vary. Some examples could include babysitting or yard work services..

Explain that a worker is i who gets paid by a producer to provide appurtenances or services.

Developing the Lesson

Ask students: What would you do if you received a pay raise or earned an increase in assart? Students might place items they would purchase with the added money.
How might your purchases affect the nation's economy? Lead students to sympathise that the money they spend would provide money to businesses that produce appurtenances or services. Because businesses pay corporate income taxes based on profit, the more profitable the company, the more income tax information technology generally pays. In state or local communities with sales tax, the buy would provide sales tax revenue.

In full general, the more people spend to purchase goods and services, the greater the revenue the authorities receives. During good economic times, government tax revenues often grow unless the government lowers tax rates. The regime thus has more coin to spend on services and purchases.

Classroom Activity

Have students read Info Sheet: Taxes and the Economic system. Inquire students to proper name taxes that they or other family members have paid recently. Record them on the lath, grouping them by type: property, sales, excise, income, and payroll taxes.

Divide students into teams, with the task of managing our economic system. Take them examine each of the taxation sources on the Info Sheet. Ask students:

What would you exercise if tax acquirement from that source rose?
Would you increment government spending?
Would you reduce the tax rate?
Would you pay down regime debt?

Side by side, ask students to pretend that the economic climate has deteriorated and tax revenue has dropped.

Inquire students: Would yous increment tax rates or cut spending? Answers will vary.

Concluding the Lesson

As a review of the market economy, enquire:

Which sectors of the economy use labor? regime and businesses
Which sectors consume goods and services produced by businesses? households and authorities
Which sectors utilize goods and services provided past authorities? households and businesses
How practice you participate in the economic system? by providing labor while working, paying taxes to the government, and buying goods and services