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Economics_Ch14 - 14(364-389 EMC Chap 14 10:58 AM Page 364...

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Why It Matters T he federal government affects your life in many different ways. Two major ways result from the government’s taxing and spending decisions. If you have a job, and your employer deducts taxes from your paycheck, you have already felt the impact of federal taxes. What kinds of taxes the government imposes and the sizes of those taxes affect important parts of your life, such as what you buy and how much you work. How the government spends the tax revenues affects you, too. For exam- ple, how much it spends on education directly affects you now and in the future. The more you know about the government’s taxing and spending policies, the bet- ter able you will be to pre- pare for and deal with these policies. 364 Most would agree that tax dollars spent for fire- fighting equipment and firefighters’ salaries is money well spent. Much of the government’s process of taxing and spending is, however, open for debate—a debate that you will par- ticipate in as a citizen and taxpayer throughout your adult life.
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The following events occurred one day in October. 5:30 P.M. As the Stevens family eats dinner, Mary Stevens tells the family about something she read today in Time magazine. Mary says, “I read today that the rich in America are getting richer and the poor are getting poorer.” “I don’t think that’s true,” Frank Stevens, Mary’s husband, says. Jimmy, the lit- tlest Stevens in the family asks, “What’s for dessert?” Are the rich getting richer and the poor getting poorer? 5:32 P.M. Vernon and Maria Cole are eating dinner. Maria says, “I think we spend too much money in this coun- try on national defense. We ought to spend less on national defense and more on education, health care, and environ- mental concerns.” Vernon says, “How much do we spend on national defense?” “I don’t know,” Maria says, “but I’m sure it’s a lot.” How much does the federal government spend on national defense? 6:04 P.M. Clark and Eddie, two friends at col- lege, are eating dinner together in the dining hall. “I found it interesting,” says Eddie, “that Russia has a flat tax.” “What’s so interesting about that?” Clark asks. “Well,” says Eddie, “Russia used to be part of the Soviet Union, a communist country, and a flat tax is usually associated with countries where low taxes are all the rage. I don’t know, it just seems to me that a flat tax and a formerly communist coun- try don’t go together.” • What is a flat tax, and what countries in the world have a flat tax? 7:16 P.M. The Martinez family is eating dinner. Elise Martinez says, “I heard today that the federal government pays hardly anything for educa- tion. I think that is wrong. If the federal government doesn’t pay for education, who does?” Ken Martinez, Elise’s husband, says, “I agree with you. I bet the fed- eral government spends more on road construction than education. And educating our kids is perhaps the most important job we have.” Does the federal government spend little on education?
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