1.1 Fractions & Tax Dollars 9.7.23

ACTIVITY: MOVE: Your Tax Dollar in Action

Follow your teacher’s directions to participate in this activity that explores how the US spends its federal income tax revenue. After you’re done, you should be able to answer these questions.

https://www.usaspending.gov/explorer/budget_function

Fractions, Decimals, and Percents

In the MOVE activity, each of the numbers is written as cents, which represent a portion of one dollar. We can translate each of the cents into a fraction, a decimal, or a percent.

Here are two examples using the 27.1¢ and 17.8¢ devoted to the two largest federal tax spending categories.

VIDEO: What are Rational Numbers?

Fractions, decimals, and percents are all rational numbers. Watch this brief video to learn more about rational numbers.

Note that integers are also rational numbers, as they can be expressed as a fraction with 1 in the denominator. For example, -6 can be expressed as

Multiplying with Rational Numbers

Thus far, we have focused on writing rational numbers as fractions, decimals, and percents and converting between one of those formats and another. Often, when talking about personal finance you are given a rational number (such as, 25% of her paycheck went to taxes) and you may want to use it to find out how much that rational number represents (for example, 25% of a $80 paycheck would be $20). You do so by multiplying.

1. Review the completed example below.

Last year, 151,681,000 tax returns were e-filed (filed online rather than using a paper copy). 44% of e-filers filed their own taxes rather than paying a professional to do so. How many people are included in that 44%?

Level 1

Payroll taxes are taxes paid on the wages and salaries earned by employees. The two most common federal payroll taxes support Social Security and Medicare and can be known as the Federal Insurance Contributions Act (FICA) and Medicare Federal Insurance Contributions Act (MEDFICA). Social Security and Medicare are both social insurance programs, providing support to eligible Americans.

NOTE: Commonly, when someone refers to “payroll taxes” or “FICA,” they mean the taxes that support both Social Security and Medicare, combined.

Here is how payroll taxes are collected:

Payroll taxes are shared by traditional employees and their employers. Alternatively, if you are self-employed, which includes gig workers or those with a side-hustle, you have to pay the employer’s portion as well as the employee’s portion. These taxes are then called Self-Employment Contributions Act (SECA) taxes, which are taxed at the rates shown below.

In addition to full-time job at Swifty Car Wash, Dynasti also has a side-gig selling elaborate, expensive birthday cakes to customers within a 50-mile radius of her home. She’s using her profits to pay down law school loans more quickly.

Level 2

Unlike payroll, income, and self-employment taxes which are based on income, sales tax is based on the cost of goods purchased. The US does not have a universal federal sales tax; instead, individual states (and sometimes local governments) make the rules regarding sales tax in their jurisdictions. Not only do they set the rates, but they also set policy on what types of items are taxed and which are tax exempt.

In the state of MA the state sales tax is 6.25%, there are no local sales taxes in the state, and the following categories are tax-exempt (no sales tax charged): Food for human consumption (non-restaurant), clothing under $175, periodicals, and admissions/tickets.

Glenn is doing some holiday shopping at his local retail superstore, and he picks up some general items for home, too. Here is his receipt:

Level 3

Five states in the country (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not charge any sales tax on purchases, which means that residents of these states will pay less at the checkout counter than consumers will in other states. For these problems, you’ll need the following information:

Dustin buys a $325 lawn mower in Delaware. His cousin Nina buys the same model in New Jersey, where sales tax is 6.625%, calculated and then added onto the total cost of the item.