.
Tax Collection
“An ARTFUL taxman so
plucks the goose as to
obtain the most feathers
for the least hissing.”
Jean-Baptiste Colbert,
treasurer to Louis XIV
Unit 5
Macroeconomics
How to get the most feathers with
least hissing?
Three Types of Tax Structures:
1. Proportional Tax or “Flat Tax”
2. Progressive Tax
3. Regressive Tax
I've been
rich and
I've been
poor. Rich
is better.
Sophie
Tucker
1. Proportional Tax
Proportional Tax “Flat Tax” is a tax for
which the percentage of income paid in
taxes remains the same for all income
levels
% rich income = % poor income
15%
= 15%
EOC study guide
Macroeconomics #4
2. Progressive Tax
Progressive Tax is a tax for which
the percentage of income paid in
taxes increases as income increases
% income rich >
30%
EOC study guide
Macroeconomics #2
%
income poor
> 15%
Federal-Individual-Individual-Income-Tax-Rate-Adjusted-for-Inflation
3. Regressive Tax
Regressive Tax is a tax for which the
percentage of income paid in taxes
decreases as income increases
EOC study guide
Macroeconomics #3
%
as income
Which Type is Most Fair?
Benefits-received principle
A person should pay taxes based on the level of
benefits he or she expects to receive
People who drive should pay a gas tax that is used to
build and maintain highways
ID Hunting and fishing licenses would amount to the
$77,253,271 it takes to run ID fish and game, not just
$25,692,000 they take in
EOC study guide
Macroeconomics #7
Which Type is Most Fair?
Ability-to-pay principle
People should pay taxes according to their ability to
pay
This is the idea behind the progressive tax—the more you
make the higher the percentage you should pay
EOC study guide
Macroeconomics #6
Where Does the Gov Get its $$?
1. Individual income tax
2. Payroll (withholding) taxes—Social Security,
Medicare and Unemployment taxes
3. Corporate income tax
Other taxes
Top Revenue Sources of Federal Government:
EOC study guide
Macroeconomics #1
1. Individual Income Tax
Biggest source of revenue$$
Employers must take out FIT (Federal Income Tax)
and in some states SIT (State Income Tax)
At the end of the year employers give employees a
W-2 Form that shows how much income tax has
been withheld and sent to the federal government
There are 3 types of “withholding” taxes that are taken out
before you get your paycheck:
EOC study guide
1. Federal Income Taxes (FIT)
Personal Finance #4
2. State Income Taxes (SIT)
3. Social Security and Medicare(FICA)
2. Social Security/Payroll/Withholding Taxes
Employers must take out FICA (Federal
Insurance Contributions Act )taxes include
Social Security and Medicare
Both employers and employees share FICA payments
12.4% of income for the first $120,000
Employers may take out for health insurance,
retirement, etc.
Pay-as-you-earn system means how much you will owe the
federal government is estimated and divided among your paychecks
3. Corporate Income Tax
Corporations must pay federal income tax on
their income
Businesses can take many deductions so
determining a corporation’s tax income is
complicated
Corporate income tax rates are progressive and
range from 15%-34%
4. "Other Taxes”?
1. Excise tax
• Gasoline, alcohol, tobacco, gambling
2. Estate tax
• A tax on the value of the money and property of a
person who has died
• exemption amount $5,340,000
3. Gift tax
• A person can give up to $14,000 a year tax-free to
each of several people
4. Import tax
• Tariffs