Taxes in the US

1
Taxes in the US

• Henrichsen Financial Literacy 2007

2
Taxes in History

• Earliest taxes based on food/services provided
  usually in relation to religion
• Tribute to leaders
• Documented use in Mesopotamia
• Beer, Grain
• Egypt
• Beer, Wine, Slaves

3
History of US Taxation

• Starts off in the US as mostly an import/export
  fee AKA tariff
• Stamp Act, Tea Act, sound familiar?
• Change in War of 1812
• Based on income of individual
• Not passed
• Civil war is the first true US income tax

4
Income Tax History cont

• Sixteenth Amendment to the constitution
• US Gov has power to tax in whatever way it wants
• Starts off at 1at 3,000 and goes to a max of 7
  above 500,000
• During WWII top rate was 94
• 1964 top tax rate is 70
• 1986 drops to 28
• Current maximum tax rate is 35

5
Types of Taxation

• Sales
• Capital Gains
• Income
• Estate
• Use
• Hotel
• Property

6
State Tax

• Only seven states have no income tax
• WA, NV, AK, WY, SD, TX, FL
• Interest and Dividends only taxed in two
• TN and NH

7
Sales Tax

• Local money for local use
• On all purchases that constitute a sale
  services are not sales
• Base rate in Utah
• 4.75 State
• 1 Local
• .25 Transit
• .25 Additional Transit
• Other taxes .35
• Total Salt Lake County 6.6

8
Capital Gains and Estate Taxes

• Capital Gains
• Profit realized on the sale of an asset or
  property
• Taxed at 15
• Usually through the sale of stocks, extra
  property, or other high value assets

• Estate Tax
• The tax on the value of a deceased persons
  property/estate
• Calculated after probate (tax court to determine
  values)
• Progressive taxation of value

9
Use Property Tax

• Property Tax
• Taxes on property
• Real estate
• Homes
• Businesses
• Land
• Developed
• Undeveloped
• Non-real property
• Equipment leased for business use
• Vehicles
• Directly tied to education in Utah
• Perceived imbalance between East/West sides of
  district for spending/contributions/use

• Use Tax
• Taxes paid on something purchased outside of the
  resident state for use in the resident state
  You live in Utah and buy a car in Oregon for use
  in Utah. You then owe a use tax as the property
  is to be used in Utah

10
Tax Systems

• Flat Tax
• Tax is assessed at a flat rate regardless of
  income level
• Pro
• Simple to use and calculate
• May tie in to economic growth
• Con
• Hits lower income levels at a higher percentage
• Social inequalities

• Regressive Tax
• Tax at the lower end of the economic spectrum
  paying more in either percentage or amount
• Social Security
• Poll tax
• Tolls
• Gas tax

11
More tax systems

• VAT
• Taxed at each level of addition of value
• Mfr
• Buys raw material converts to prod
• Taxed
• Retail
• Buys product wholesale and resells
• Taxed
• Consumer
• Purchases end product w/ tax
• Requires tax calculated paperwork at each level.

• Progressive tax
• Amount paid is determined on income
• Proportionate
• US Income tax
• Utah state tax