Chapter 12 - The design of the tax system

Chapter 12 - The design of the tax system - Chapter 12 The...

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Chapter The Design of the Tax System 12
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Financial Overview of U.S.  Government Government revenue As percentage of total income Increased  As economy’s income has grown Government’s revenue from taxation has  grown even more As a nation gets richer Government - takes a larger share of  income in taxes 2
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Figure Government revenue as a percentage of GDP 1 3 This figure shows revenue of the federal government and of state and local governments as a percentage of gross domestic product (GDP), which measures total income in the economy. It shows that the government plays a large role in the U.S. economy and that its role has grown over time.
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Table Total government tax revenue as a percentage of GDP 1 4 Sweden  France  United Kingdom  Germany  Canada  Brazil  Russia  United States  Japan  Mexico  Chile  China  India  50% 45 37 36 36 30 32 28 27 20 19 15 14
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Financial Overview of U.S.  Government The federal government Collects about two-thirds of taxes Receipts Individual income tax -  based on total  income Marginal tax rate - applied to each additional  dollar of income Payroll taxes - tax on wages “Social insurance taxes” – pay for Social Security  and Medicare Corporate income tax - based on profit Other taxes: excise tax, estate tax, custom  5
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Table Receipts of the federal government: 2007 2 6 Tax  Amount (billions) Amount  per person Percent  of receipts Individual income taxes Social insurance taxes  Corporate income taxes  Other  Total  $1,163  870 370 165 $2,568 $3,851  2,881 1,225 546 $8,503 45% 34 14 7 100%
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Table The federal income tax rates: 2007 3 7 This table shows the marginal tax rates for an unmarried taxpayer. The taxes owed by a taxpayer depend on all the marginal tax rates up to his or her income level. For example, a taxpayer with income of $25,000 pays 10 percent of the first $7,825 of income, and then 15 percent of the rest. On taxable income… The tax rate is… Up to $7,825  From $7,825 to $31,850  From $31,850 to $77,100  From $77,100 to $160,850  From $160,850 to $349,700  Over $349,700  10% 15% 25% 28% 33% 35%
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Financial Overview of U.S.  Government The federal government Spending Social Security Transfer payments to the elderly National defense Medicare Other health spending Medicaid Spending on medical research  8
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Financial Overview of U.S.  Government The federal government Spending Income security - transfer payments to poor  families  Temporary Assistance for Needy Families (TANF) Food Stamp Net interest  Other spending Federal court system; Space program Farm-support programs Salaries of members of Congress and the president 9
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Table Spending of the federal government: 2007 4 10
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Chapter 12 - The design of the tax system - Chapter 12 The...

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