Tax Acct Notes - Chapter 1

Tax Acct Notes - Chapter 1 - Tax 1. Involuntary payment 2....

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Tax 1. Involuntary payment 2. Required by government 3. Unrelated to specific benefit Tax base – value subject to tax Tax = f(Tax_Base, Tax_Rate) Tax = Tax_Base * Tax_Rate Types of Tax Rates 1. Statutory Marginal Tax Rate – the amount of money paid/saved on the next dollar of taxable income a. SMTR = (Change in Tax)/(Change in Taxable Income) = (New T– Old T)/ (New TI – Old TI) 2. Average Tax Rate – average amount paid total taxable income a. ATR = (Total Income Tax)/(Total Taxable Income) 3. Effective Tax Rate – The average rate of tax on income from all taxable and non-taxable income a. ETR = (Total Income Tax)/(Economic Income) 4. Effective Marginal Tax Rate – rate of tax that will be paid on the next dollar of income earned or saved on the next dollar of deduction a. EMTR = (Change in Tax)/(Change in Economic Income) Proportional (flat tax) – the ATR stays the same as the tax base increases – MTR = ATR Progressive – ATR increases as the tax base increases – MTR > ATR Regressive – ATR decreases as the tax base decreases – MTR < ATR
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This note was uploaded on 05/26/2011 for the course ACCT 5400 taught by Professor Staff during the Spring '08 term at University of Georgia Athens.

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Tax Acct Notes - Chapter 1 - Tax 1. Involuntary payment 2....

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