Ch8___Taxes__Handouts_

Ch8___Taxes__Handouts_ - Taxes CHAPTER 8 CHAPTER CHECKLIST...

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Taxes CHAPTER 8
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C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Ch8.0: Examine the adverse impact of taxes 2 Ch8.1: Explain how taxes change prices and quantities, are shared by buyers and sellers, and create inefficiency. 3 Ch8.2: Explain how income taxes and Social Security taxes change wage rates and employment, are shared by employers and workers, and create inefficiency.
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8.0 Taxes ± What is taxation?
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8.0 Taxes ± History First known tax was in Ancient Egypt around 3000BC. In Genesis (chapter 47, verse 24), it states "But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children."
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8.0 Taxes ± Purposes
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Taxes 0 500 1,000 1,500 2,000 2,500 3,000 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Billions of Dollars Federal Tax Receipts (1962-2007) $2.6trillion
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8.0 Taxes 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Federal Tax Receipts as % NGDP
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8.0 Taxes ± Purposes
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8.0 Taxes ± Types of Taxes (1) Direct Tax Indirect Tax
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8.0 Taxes ± Types of Taxes (2) Personal Income Tax - % of income Corporate Income Tax - % of profits Sales Tax - % of purchase price Property Tax - Capital Gains Tax - Payroll Tax - Lump Sum Tax -
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8.0 Taxes ± Calculating Taxes Paid T = total taxes paid Y = income Rate Tax Avg. Marginal Tax Rate
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U.S. Personal Income tax rates in 2009. 8.0 Taxes Marginal Tax Rate Single Married Filing Jointly 10% $0 – $8,350 $0 – $16,700 15% $8,351– $33,950 $16,701 – $67,900 25% $33,951 – $82,250 $67,901 – $137,050 28% $82,251 – $171,550 $137,051 – $208,850 33% $171,551 – $372,950 $208,851 – $372,950 35% $372,951+ $372,951+
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8.0 Taxes ± 1) The Federal government is in need of more tax revenues. Why don’t they just increase tax rates by enough to cover their shortfall? ± State & Local governments are in a similar situation. How might their concerns differ from the Federal government?
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8.0 Taxes ± 2) The top marginal income tax rate reached over 90% in the 1940’s and 50’s. Why do you suppose the tax rate was so high? What impact might this have on the supply of labor? (Draw a labor supply curve with Wage on the vertical axis and quantity of labor on the horizontal.)
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8.0 Taxes ± 3) Why would a tax incentivize me to die on 1/1/2010 and not 12/31/2009?
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8.0 Taxes ± 4) How could taxes reduce the rate of marriage?
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8.0 Taxes ± 5) Why do birth rates impact your Social Security benefits? What’s the “boom” issue today in the U.S.?
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8.0 Taxes ± 6) Why does the most recent stimulus bill allocate $116bln in reduced tax withholding from paychecks over two years, rather than at one time.
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± 7) Why might a politician prefer a tax rebate to a tax rate reduction? Try to formulate two reasons.
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This note was uploaded on 03/24/2009 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.

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Ch8___Taxes__Handouts_ - Taxes CHAPTER 8 CHAPTER CHECKLIST...

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