LESON24A

LESON24A - Econ 275 - Public Finance - Fall 1992 - 11/24/92...

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Econ 275 - Public Finance - Fall 1992 - 11/24/92 - Lesson #24 - leson24a.275-- Page -- Chapter 22 - Taxation on Capital Depreciation-Skip Capital Gains - Lots of time on this. Relationship between tax rates and savings behavior. Evidence mixed. Current tax treatment only taxes realizations. Amounts to giving an interest-free loan on taxes due. Tax principle. Taxes deferred equals taxes saved. This creates what is known as locked in effect Example: Pension and retirement income Inflation--taxing inflationary gains can result in negative real interest rates. Disincentive to save. Risk- Chapter 24 - Tax Avoidance Distinquish between avoidance and evasion Evasion: not paying taxes legally owed. Typically this would involve underreporting income or not reporting at all. Anecdotes? Cash transfers make detection difficult. Nannies, other household laborers, In-kind payments-"I'll fix your roof if you fix my car" , tip income. Leona Helmsley, new york Hotel "queen" convicted of evading more
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LESON24A - Econ 275 - Public Finance - Fall 1992 - 11/24/92...

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