1 Chapter Types of taxes and jurisdictions that use them Basic Tax Terminology -Tax rate is given by the law -Proportional tax is similar to social security and Medicare. It is a flat tax. It is capped at a certain amount. Medicare goes on forever. The higher the income the higher the rate -Progressive is when you move up brackets based on earnings. -Regressive is when you go down tax brackets based on higher income. (Ex. Monte Carlo) -The taxpayer is someone that pays the tax. If I own the house and rent it out to a student I am the taxpayer but the tenant is the incidence. If you buy something from the grocery store you are the incidence paying the sales tax but the store is the taxpayer. -Jurisdiction is where the governments would be able to tax you. US citizens living in USA pay taxes to the US government. If you are a US citizen living in Brazil then you pay their taxes as well as US taxes. However, if Brazil is 20% tax and you pay 35% in US you get to credit the 20%. Estate taxes are when you travel or are sent and earn money in another state. That state will withhold a certain percentage of that money earned. Local and State Taxes -Local is more city county types o taxes. The city of Boulder gets revenue from real property taxes. Real is anything permanently attached to the land. (Ex. The house) Personal property would be thing like the chairs in the classrooms and desks. Concrete is real, while carpet is personal. Individuals pay personal taxes on their licenses for cars. It is based on the value of the car. -If the sales tax is 8.31% that is broken down in different cuts. The state gets a percent, RTD, etc. Personal income taxes go to the state. A lot of states don't have income taxes because they can rely on revenue from their resources. (EX. Texas has oil) For personal taxes it's where you work is where you pay. -Corporate income tax is tougher. If you have any fixed assets in another state you will have to pay the state taxes those on assets. It is usually proportional. If you are paying people in another state they will pay taxes based on the sources of revenue. (Property, Payroll, Sources of Revenue) Me: -Real and personal taxes account for more than 75% of local government tax revenues -Real property taxes are levied annually and based on market value -Governments can give out abatements, which allow for temporally tax exemptions. This is useful to bring in corporations to create more jobs for the economy -Personal property is valued based in the individual or corporation, not the government.
-Household tangibles are all personal non-real property. This includes cars, boats, airplanes -Business tangibles are inventory, furniture, fixtures, equipment, and machinery. -Intangibles are things like stocks and bonds -State taxes: 90% tax revenue from sales tax and income tax. -Excise taxes are state imposed taxes on the retail sale of specific goods (gas, cigs, hotel)
Federal Taxes -16th Amendment enabled taxing of revenue. Taxes are due April 15 of every year. Used to be March 1. -There are Income taxes, employment taxes and estate taxes. Employment is all the withholdings from your wages. -Federal tax law has three branches. Statutory is the law branch- they write the tax law. When they disagree on how it should work it goes to joint committee. Once it hits congress it goes to the president to sign. Administrative is the department of treasury. Within the treasury is the IRS. When a taxpayer and the government disagree it can go to court. This is the judicial branch.
ME -Social Security and Medicare are the 2 largest programs. They are not funded through from the general revenue of income tax, but through revenues from the federal employment taxes. -Value added tax is a tax percent added to firms engaged in production of goods. If a firm has a product that costs $40 and sells it for $46 (VAT of 5%), then it must pay 30 cents on every item sold ($6*.05)