Brief Response
• What are the purposes of government
collecting taxes and other revenue? (5)
• Government offices and equipment
• Government employees
• Government services
• Government debt
• Discourage unwanted, yet legal, behavior
CH9 Section 3 p. 238 Terms:
• Intergovernmental revenue
• 238 funds collected by one level of
government that are distributed to other
levels of government.
• Federal government to states.
Property tax
• 241 a tax on possessions
• Tangible: real estate, buildings, furniture,
automobiles, farm animals
• Intangible: stocks, bonds, bank accounts
• Tax assessor:
• Government person authorized to put a value on
property for tax purposes.
• Must know “reasonable” value of property.
On your “other sheet”, if you still have
room or start a new “other sheet”
• How much is the tax for year 2012-13?
• What is another term for “taxes” used on the
form?
• There is one more problem coming up the
next page, so do not turn this in.
Payroll withholding statement
• 242 summary statement attached to a
paycheck, detailing
– Two-weeks, month’s pay (gross income)
– Withholding and deductions
– Payments and deductions so far in the year
– What employee is actually receiving (net income)
– Last question for your “other sheet”: What is the
withheld amount for the pay check? (Turn in your
“other page” when you are done).
On your “other sheet”, if you still have
room or start a new “other sheet”
• How much is the tax for year 2012-13?
• 4263.82
$2131.91
+$2131.91
=$4263.82
• What is another term for “taxes” used on the
form?
• levies
Payroll withholding statement
– What is the withheld amount for the pay check?
– $7.82
Section 4 p. 244 Terms:
• Accelerated depreciation
• 245 tax relief from the early 1980s allowing
businesses to
– Depreciate capital more than normal
• Allowing them to reduce their taxes substantially.
Investment tax credit
• 245 a reduction in business taxes that are
tied to investment in
– New plants and equipment
• Business taxes went from 12.5% in 1980 to
– 6.2% in 1983
• Most ordinary citizens still pay an average of
15% of their income.
– “Trickle-down economics”
surcharge
• 245 additional tax above and beyond the base
rate
– 1986 tax restructuring intended to prevent rich
from not paying taxes at all
Alternative minimum tax
• Personal income rate that applies whenever
the amount of taxes paid falls below the
designated level
• People at a prescribed income rate, have to
pay a minimum tax of 20%, regardless of
– Deductions
– loopholes
Recent AMT rates
Status
Single
Married Joint
Married Separate
Trust
Corporation
Tax Rate: Low
26%
26%
26%
26%
20%
Tax Rate: High
28%
28%
28%
28%
20%
High Rate Starts
$175,000
$175,000
$87,500
$87,500
n/a
Exemption 2009
$46,700
$70,950
$35,475
$22,500
$40,000
Exemption 2010
$33,750
$45,000
$22,500
$22,500
$40,000
Exemption phase out starts at
$112,500
$150,000
$75,000
$75,000
$150,000
Zero 2009 exemption at
$299,300
$433,800 *
$216,000
$165,000
$310,000
Zero 2010 exemption at
$247,500
$330,000 *
$165,000
$165,000
$310,000
Capital gain rate
25%
25%
25%
25%
20%
Capital gains
• 246 profits from the sale of an asset held for
12 months.
– Long-term investments
• Republicans reduced this tax in 1997
– 28% to 20%
Value-added tax
• 247 aka: VAT
• A tax placed on the value that manufacturers
add at each stage of production
• Like a national sales tax
– European Union (VAT)
– Japan (“shohizei”)
• US does not have one.
Flat tax
• 249 proportional tax on individual income after a prescribed
level has been reached.
• Advantages
– Simple
– Minimizes loopholes
– Easy to prepare
• Disadvantages
– Taxes used for incentive would disappear
• Charities, environment, investment/reinvestment, consumption
– Difficulty in deciding the rate levels
• EC: Often proposed by some members of which party? Explain.
• Republican
• Would reduce taxes on wealthy individuals and businesses.
Hwk Assessments, Class Work,
to Know
Assessments: Checking for Understanding
CH9, S3
• 1
• Funds collected by one level of government
that are distributed to other levels of
government for expenditures.
CH9, S3 Assessment
•
•
•
•
•
•
3
Sales tax
Intergovernmental revenues
Individual income taxes
Employee retirement contributions
Assessments levied on state employees
CH9, S3 Assessment
• 4
• State:
–
–
–
–
Collect from intergovernmental revenues
Sales taxes
Employee retirement contributions
Individual income taxes
• Local:
–
–
–
–
Collect from intergovernmental revenues
Property taxes
Public utilities and state liquor store sales
Sales taxes
CH9, S3 Assessment
•
•
•
•
•
5
Federal income tax
State income tax
City income tax (not LA)
FICA taxes
Assessments: Checking for Understanding
CH9, S4
• 1
• To influence and reward behavior
– Investment/Reinvestment
– Charity
– Environment
– Consumption
CH9, S4 Assessment
•
•
•
•
•
•
3 (just list – review in text)
Economic Recovery Tax Act of 1981
Tax reform act of 1986
Omnibus Budget Reconciliation Act of 1993
Taxpayer Relief Act of 1997
2001 tax reform
CH9, S4 Assessment
• 4
• Advantages:
– Hard to avoid
– Widely spread tax incidence
– Easy to collect
– Encourages savings
• Disadvantages:
– Invisible to consumers
– Competes with state sales taxes
CH9, S4 Assessment
• 5
• Advantages
– Simple
– Minimizes loopholes
– Easy to prepare
• Disadvantages
– Taxes used for incentive would disappear
• Charities, environment, investment/reinvestment, consumption
– Difficulty in deciding the rate levels
CH9, S4 Assessment
•
•
•
•
6
Tax code is more complex now
Record tax revenues of the 1990s
Political power changes
image, p. 239
•
•
•
•
Question
Intergovernmental revenue
Sales taxes
+ which one(s) do you directly pay into at
your age?
– Sales tax
– Hospital fees
– Utility and liquor stores
– Other
image, p. 240
• Question
• Highest: Hawai’i and New York
• Lowest: New Hampshire and South Dakota
image, p. 241
• Question
• About 27% (.26663…),
• +how did we get that number?
(800 – 586.69) ÷ 800
image, p. 243
•
•
•
•
•
Questions
1
By using credits to reduce its tax liability
2
Because they are able to take advantage of
favorable tax rules and regulations
– Most can afford expensive tax lawyers and
accountants that ordinary cannot.
Image, p. 245
• Question
• Tax credits for children
• + Was the American Revolution about having
to pay taxes?
• No, it was about
– Having the right to decide if a tax was necessary
and proper.
• Taxation WITH representation
Image, p. 246
• Question
• The Bush Tax Cuts (tax relief, tax credits,
loopholes, and deductions) that will last 10
years (2010) and must be renewed.
Bush Tax Cuts
• On your “other paper”
• Monday, November 15, 2010, the battle in the “Lame Duck:
Congress began….. Jon Stewart describes the conservative
media and political blitz warning the public about the
dangers of the liberal’s plans with the Bush tax cuts.
– Liberals want
– them to end
• Wealthy individuals and business pay the proper share of current
taxes.
– Conservatives want
– to make them permanent
• Business and wealthy individuals pay less or no tax because of tax
credits, deductions, etc.
• Ordinary Americans have no such advantages and pay same taxes.
Image, p. 247
•
•
•
•
•
Questions
1
Tax revenues as a percentage of GDP
2
Canada’s rate increased slightly throughout
the period
Image, p. 248
• Question
• VAT tends to be regressive because
– persons with lower and fixed incomes tend to
spend a larger percentage of their incomes on tax.
Brief Response
• What are the arguments for and against tax
credits and deductions? (2)
• Pro (for):
• Con (against):