Income

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Income Payroll Taxes

• The American Federal Revenue Structure
• Transparency of Federal Taxes
• Their Fairness
• Their Efficiency and Collection Cost
• Adequacy

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The American Federal Structure

• A system of assigned responsibilities and revenue
  sources with three primary levels

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The American Federal Structure

• A system of assigned responsibilities and revenue
  sources with three primary levels of government
• Federal
• State
• Local

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The Main revenue sources of the federal level of
government are?
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The Main revenue sources of the federal level of
government are?
Income Tax Payroll tax
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The Main revenue sources of the state level of
government are?
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The Main revenue sources of the state level of
government are?
Sales Tax Income Tax
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The Main revenue sources of the local level of
government are?
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The Main revenue sources of the local level of
government are?
Property Tax User Fees
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The US is Different
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Which is more transparent?

• Income Tax
• Payroll Tax

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Which is fairer?

• Income Tax
• Payroll Tax

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Which is more efficient?

• Income Tax
• Payroll Tax

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Which has the lower compliance cost?

• Income Tax
• Payroll Tax

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Individual Income Tax

• Taxpayers spend 3.5 billion hours complying with
  the tax system and 20.8 billion in out-of-pocket
  outlays.
• At 20 per hour, that adds up to a compliance
  cost in 2002 of 91 billion
• Self-employed taxpayers spent on the average 59
  hours and 384.

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Are they adequate?

• Income Tax
• Payroll Tax

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Historical Percentage of Revenue by Source
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When we assess federal tax policy

• Should we lump the income tax and payroll taxes
  together or discuss them separately?
• Should we consider spending simultaneously?

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From an Equity/Efficiency Perspective

• The whole range of related policy issues should
  be considered together
• These are
• taxes (payroll and income), welfare, social
  security, pensions, health care, and labor
  markets