Taxes

1
Taxes

• By Professor Jermaine Whirl
• For Students of East Georgia College

2
US Taxes

• Payroll Taxes
• A tax levied on the earnings of the workers.
• Payroll taxes are the primary means of financing
  social insurance programs

• Individual Income taxes
• A tax paid on individual income accrued during
  the year- includes all sources of income (such
  interest earnings from household savings as well.
  Taxes the entire income of a family, not just
  the income of one individual.

3
US Taxes Continued

• Capital Gains Taxes
• Earnings from selling capital assets such as
  stocks, paintings, and houses.
• Wealth Taxes
• Taxes paid not on income as it is accrued but on
  the value of the assets held by a person or
  family, such as land, jewelry, real estate, etc..

• Property Taxes
• A form of wealth tax based on the value of real
  estate, including the value of the land and any
  structures built on the land.
• Estate Taxes-
• A form of wealth tax based on the value of the
  estate left behind when one dies.

4
US Taxes Continued

• Characteristics of Taxes
• Universality - difficult to evade, promotes
  voluntary compliance
• Administrative Simplicity - easily collectable
• Transparency - easily discernible tax burdens
• Clarity - easy to understand
• Fairness - Individuals who are the same in all
  relevant aspects should be treated equally
• Not Harmful to Economy

• Corporate Income Tax
• Tax levied on the earnings of corporations.
• Sales Tax
• Taxes paid by comers to vendors at the point of
  sale.
• Excise Tax
• A tax paid on the sales of particular goods, such
  as cigarettes or gasoline.

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US Tax Facts

• Almost 90 of the federal government's tax
  revenues comes from individual income taxes and
  payroll taxes.
• Tax Revenue Data
• 2008 Federal Tax Info.
• 51.4 came from Individual income taxes
• 35 from payroll taxes
• 1.4 wealth taxes
• 7.8 Corporate Taxes
• 3.4 Consumption Taxes

• State Local Governments Tax Revenue Data State
  of Georgia
• 38 came from consumption taxes
• 26. from income taxes
• 31.6 Wealth Taxes
• 4.4. Corporate Taxes

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Tax Characteristics

• Vertical Equity
• The principle that groups with more resources
  should pay higher taxes than groups with fewer
  resources.

• Horizontal Equity
• The principle that similar individuals who make
  different economic choices should be treated
  similarly by the tax system.

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Vertical Equity in Detail

• Progressive Tax System
• Tax system in which effective average tax rates
  rise with income. ( I make more money, I pay more
  taxes) Burden on the rich
• Regressive Tax System
• Tax systems in which effective average tax rates
  fall with income. ( make more money, I pay less
  taxes) Burden on the poor
• Proportional Tax System
• Tax system in which the effective average tax
  rates don't change with income. (Everyone pays
  the same tax rate)

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Fair Tax (National Sales Tax-Flat Tax)

• What is it?
• This would be a national sales tax, as defined by
  legislation of 23 of the total price including
  the local and state sales taxes.
• The system would replace the current complex tax
  system that we have today.

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Reasons for the proposal

• Benefits or Pros
• The tax would be proportional therefore you
  would not pay more in taxes, just because your
  income increased.
• The tax would also collect taxes from individuals
  who evade personal income tax collection.

• The tax burden would broaden the tax base,
  effectively taxing wealth, and increasing
  purchasing power.
• It would ease tax collection compliance which
  could result in increased economic growth
  increase US competitive advantage in trade.

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Reasons against the proposal

• Opponents contend that a consumption tax lead
  raise less revenue for the federal government
  than our current tax system leading the
  government into a budget deficit.
• Some economists suggest that this would cause
  rapid unemployment for IRS workers, and tax
  preparation workers.

• Opponents also argue that this would decrease the
  tax burden on high income earners and increase it
  on the middle class and low income earners.
• Others argue that 23 plus additional state and
  local taxes would cause people to purchase items
  out of black markets.
• Others also suggest that Americans wouldnt not
  want to give up their tax deductions.