Tax Test 1 Chapters 1-8

Tax Test 1 Chapters 1-8 - Tax Test 1 Chapters 1-8 Chapter 1...

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Unformatted text preview: Tax Test 1 Chapters 1-8 Chapter 1 • A tax is a means of distributing the burden of the cost of government. The only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. • Corporations are entities separate and distinct from their shareholders. • Example of Tax Incidence o Income Tax Incidence- The government raises income taxes on a manufacturing corporation. The manufacturer raises the price of goods to the public. In this case the manufacturer is the taxpayer and remit the new tax to the government however, the economic burden of the tax falls on the consumer in the form of higher prices. o Property Tax Incidence- the government raises property taxes on apartment complexes, in result the landlord charges more for rent. The landlord remits the tax to the government however the economic burden falls on those renting apartments in the form of higher rent. • The dollar amount of a tax is calculated: Tax(T)= Rate (r) x Base (B). • Annual income tax is an example of an activity-based tax. • Our economy is tax relevant in almost every detail. • According to the most recent census AD Valorem Taxes (real and personal property) account for more than 70% of local government revenues. • A unique feature of real property taxes is that the tax is determined annually, based on the jurisdiction’s need for revenue for that particular budget year. • Governments may grant permanent tax exempt status to realty owned by charitable, religious, educational organizations, and publicly owned realty. • The 3 general classes of taxable personalty: household tangibles, business tangibles, and intangibles. Household tangible commonly subject to taxation include automobiles and recreational vehicles, pleasure boats, and private airplanes. Taxable business tangibles include inventory, furniture and fixtures, machinery, and equipment. The most common intangible assets subject to personal property tax are marketable securities. • 90% of state tax revenues come from sales tax and income tax. • A use tax acts as a backstop to a sales tax by discouraging residents from purchasing products in neighboring jurisdictions with lower sales tax. • Consumer may take a credit for out-of-state sales taxes against their in-state use tax liability. • 2 main sources of federal tax revenue are Individual Income tax and Employment/Unemployment tax. • The 16 th amendment state that congress shall have the power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several states, and without any regard to any census or enumeration....
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This note was uploaded on 08/08/2011 for the course ACCT 3843 taught by Professor Kaden during the Spring '09 term at Arkansas.

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Tax Test 1 Chapters 1-8 - Tax Test 1 Chapters 1-8 Chapter 1...

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