Taxes - Levels of Taxes 1 Federal 2 State 3 Local aka city or parish 5 Major Taxes 1 Income 2 Sales 3 Payroll(salary 4 Corporate(profit Characteris 1

Taxes - Levels of Taxes 1 Federal 2 State 3 Local aka city...

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- Levels of Taxes 1. Federal 2. State 3. Local ( aka: city or parish) - 5 Major Taxes: 1. Income 2. Sales 3. Payroll (salary) 4. Corporate (profit) - Characteris: 1. Base: a. What are you going to tax? b. 5 major taxes are the base that you get taxed on c. Large tax base no increase in tax rate d. Small tax base increase in tax rate 2. Rate a. Every tax has a rate b. Percentage that you are going to get taxed on c. If government reduces tax rate, something else is going to increase i. Because government always needs more money 1. Ex: teacher salaries get raised, however, they reduce the number of workers in childcare 3. Tax structure a. Progressive System: i. Income 1. Drives the system today 2. 40% of revenue for the state comes from this 3. The last rate from the tax bracket is called the marginal rate and is the most important b. Regressive i. Medicare and Medicaid c. Proportional Tax: i. Sales tax ii. Flat Tax: 1. The same percentage d. Regressive and Proportional tax are unfair i. Based on how much you make you will spend more or less money. Poor people will have to spend more than rich people. Why do we have taxes?
- Government needs revenue because it has to finance: 1. Service a. Mandatory i. Health care, disability, etc. ii. 60% b. Discretionary i. Need a vote ii. 40% 2. Redistribution: a. Of the wealth b. Take care of the people in need 3. Discourage bad behavior a. Tax on: i. Drugs ii. Alcohol iii. Porn iv. Fast food 4. Encourage “good behavior” a. Anything Maddy does = Maddy is an angel = everything she does is good behavior b. Stimulate the economy i. Fiscal policy 1. Tool to gear economy where you want it to be c. Incentives Tax Burden: - Tax burden shifts to the business if the demand is elastic - Tax burden shifts to consumer if demand is inelastic Characteristics of taxes 1. Simplicity a. Must be simple and easy to understand b. Keep necessary records and pay the taxes on a predictable schedule 2. Efficiency a. Government administrators should be able to assess and collect as without spending too much time or money b. Taxpayers should be able to pay taxes without giving up too much time or paying too much money in taxes 3. Certainty
a. Clear to the taxpayer when a tax is due, how much money is due, and how the tax should be paid b. Needs to be a set system 4. Equity a. System should be fair, so that no one bears too much or too little of the tax burden i.

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