Discussion Questions and Problems.docx

Discussion Questions and Problems.docx - Stephanie...

This preview shows 1 out of 3 pages.

Stephanie Tetreault Discussion Questions Chapter 1: 10. Dontae stated that he didn’t want to earn any more money because it would “put him in a higher tax bracket.” What is wrong with Dontae’s reasoning? Dontae must believe that all of his income is taxed at his marginal tax rate. But actually, all his income is not taxed at the marginal tax rate. Dontae would have to pay a higher tax rate only on the additional income earned, and the current rate is applied to the income he already makes. So, moving to a higher tax bracket does not affect the current income. Marginal tax rate- the tax rate that is applied or pertained to the “next additional increment” of the taxable income 1 3. Describe the differences between proportional, progressive, and regressive tax rate structures. Proportional tax rate structure- the tax rate structure in which rate of taxation is constant throughout the tax base. Example: sales tax Progressive tax rate structure- the tax rate structure in which rate of marginal tax increases as the tax base increases. Example: federal estate taxes and gift taxes Regressive tax rate structure= the tax rate structure in which the rate of marginal tax decreases as the tax base increases. Example: Taxes on alcohol or tobacco Low Medium High 0 10 20 30 40 Proportional Progressive Regressive Tax Base Tax Rate
Image of page 1

Subscribe to view the full document.

16. What is the tax base for the Social Security and Medicare taxes for an employee or employer? What is the tax base for Social Security and Medicare taxes for a self-employed individual? Is the self- employment tax in addition to or in lieu of federal income tax? For employee or employer: Employee’s wages is the basis for calculating Social Security and Medicare taxes both for employer and employee. For self-employed: The net earning from self-employment is the basis for calculating Social Security and Medicare taxes for self-employed individual. The self-employment tax is an addition to federal income tax 17. What are unemployment taxes? The payment of a tax to fund the temporary unemployment benefits for the individuals, who are terminated from their jobs without any cause. It is paid by the employers to the federal and state governments. Salaries or wages are the base for ascertain the unemployment tax. 21. What is the difference between sales tax and a use tax? Sales tax- the duties levied on retail sale of personal property such as; clothes and cars. Sales tax is imposed on retail sale of personal services such as fees for accounting services and legal charges. The base for sales tax is the retail sale of goods and services. Use tax- the base for a use tax is the retail price of the goods owned, possessed, or consumed within a state, which are not purchased within the state. For example, when you purchase a good over the internet. The purpose of a use tax is to discourage the taxpayer to buy goods outside their home state.
Image of page 2
Image of page 3
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern