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Taxes - Head Matters


2.   Understanding Taxation

When you are figuring how much state or federal taxes you owe, you don’t pay based on the total income you’ve earned.  You are allowed to subtract an amount for exemptions – to free up a portion of your income from tax because you have to meet the basic needs for yourself and the others you support.  You are an exemption.  If you have a spouse, that person is an exemption.  If you have children, each of them is an exemption.

In certain situations, the government actually wants to help you pay your taxes. To do so, they issue tax credits or subtractions directly to your taxes before you pay them.  A tax credit is subtracted dollar for dollar on the tax we owe.  The government uses tax credits for activities it wants to encourage people to do: first-time home purchases, college tuition, or solar energy for our homes are examples.

Exercise: Pros and Cons of Credit?

Directions: Following is a chart of some government services paid for by taxes. The two columns to the right ask you to indicate, first, which of those services you have personally benefited from or used and, second, which have benefited or been used by someone in your family - children, spouse, parents, grandparents, aunts, uncles. It is important for you to know how you use the services paid for by hard-earned tax dollars.

  I Use(d) My Family Use(d)
1. National Defense
2. Police protection
3. Highways
4. Management of natural resources
5. Water supply/clean water
6. Public land
7. National Parks
8. Air pollution control
9. Noise pollution control
10. Quality and safe home construction, cars, electrical appliances
11. Consumer protection
12. Education
13. Research
14. Health services for elderly
15. Financial aid for disabled and unemployed
16. Financial aid for families with dependent children
17. Social services for low-income individuals and families
18. Social Security
19. Medicare
20. Food Stamps
21. Housing subsidies
22. Training of health-care professionals
23. Medical research
24. Veterans benefits
25. Mass transit systems
26. Airports
27. Coast Guard
28. Regulation of airways
29. Assistance to railroads and shipping
30. Recreation
31. Energy research
32. Conservation
33. Space exploration
34. Scientific research
35. Federal law enforcement
36. Federal prisons
37. Postal Service
38. Funds for crop subsidies
39. Agricultural research
40. Conservation of farmland

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