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Finance: What's the Difference Between Federal and State Taxes? 145 Views


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Description:

What is the difference between federal and state taxes? Federal taxes: the whole country. Taxes for national defense, interstate roadways, national parks, etc. State taxes: local. Think: smaller roads, schools, local parks, etc. And gas taxes lean both ways.

Language:
English Language

Transcript

00:02

Finance, a la Shmoop. [title page] What's the difference between federal

00:07

and state taxes? All right, well, when the U.S. came together a quarter of a

00:13

millennium ago, it was the United States. See, right there in the title you get a [founding fathers pictured]

00:19

sense of the tension. We started out as just states. These things. Then, we came together [individual states on map]

00:27

and created a central government that kind of sort of had control over each of [government tries to control states]

00:31

the states, and well, you can imagine that not everyone agreed about every rule.

00:36

Some states wanted murder to be an offense punishable by death, while other [protesters picket]

00:41

states wanted it to be, you know, legal. Well, okay maybe not legal, but they

00:46

had different ideas about how you should deal with murderers... i.e., not all of them [person pushed into lion pit]

00:49

should be thrown into the lion pit. Anyway, this was all well and good when it just

00:54

involved local laws and customs. Local customs dictated local laws, and then

01:00

local taxes could be allocated accordingly. So they could pay for things [local laws and taxes diagram]

01:05

like a bouncy house for the mayor. But what happened when there was a threat of [mayor in bounce house]

01:09

military invasion? Well, what if Georgia wanted to fight

01:13

them commies, but North Carolina didn't? Yeah, that didn't work out so well. So [states argue over military]

01:18

for some things, there has to be a federal law that supersedes state law

01:23

and federal taxes that support those laws, like military spending. If only those [federal laws and taxes diagram]

01:28

pacifists in Maryland didn't want to spend money on guns, well, then what would

01:32

the rest of the country do? Yep, let Maryland start speaking Russian or [Maryland hippies hang out]

01:36

Chinese as the preferred language while the rest of the nation just watched [Maryland conquered]

01:39

while sipping their tea? Or in the United States' case, you know, eating doughnuts? Yeah. [Americans eat doughnuts]

01:44

So, military spending protects the entire country, and those expenses come out of [military budget chart]

01:50

federal taxes. National highways? Federal. Border Patrol? Federal. Space travel? [federal and local laws/taxes demonstrated]

01:57

Federal. Schools? State. Libraries? State. Little country roads? State... local.

02:04

You know... Or even smaller in the form of county

02:07

taxes as we get littler and littler... yeah. So federal taxes pay for all the big

02:12

stuff--the things that we share as unified Americans no matter what state

02:16

we live in, while state taxes pay for stuff particular interest to our little

02:20

local state, wherever it is. You know, like DC taxes aren't going to be used to

02:25

build a fire department in Minnesota. Stuff like that. [fire department in Minnesota]

02:27

Besides, Washington has their, you know, own fires to put out. [newscaster speaks]

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