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CH 9 TAXES

A brief overview of CH 9
by

Brad Hayes

on 4 November 2015

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Transcript of CH 9 TAXES

Taxes can be used to encourage/discourage certain activities.
TAXES--CHAPTER 9
ECONOMIC IMPACT OF TAXES
HOW DO TAXES AFFECT US?
CRITERIA FOR EFFECTIVE TAXES
Fair (Equity)

Simple

Efficient
ALL TAXES SHOULD BE FAIR TO EVERYONE
ALL TAXES SHOULD BE EASY TO UNDERSTAND
ALL TAXES SHOULD BE EASY TO COLLECT
TWO PRINCIPLES OF TAXATION
BENEFIT PRINCIPLE
ABILITY TO PAY PRINCIPLE
CATEGORIES OF TAXES
1—Individual Income Tax
FEDERAL GOVERNMENT


IRS (INTERNAL REVENUE SERVICE)
– IN CHARGE OF COLLECTING/AUDITING INCOME TAXES
2-- FICA -- FEDERAL INSURANCE CONTRIBUTIONS ACT
A
PROPORTIONAL TAX
UP TO $106,800
BECOMES A
REGRESSIVE TAX
AFTER THAT
(YOU STOP PAYING INTO IT)
3--Corp. Income Tax
Tax a corporations pays on its profits
4--OTHER FEDERAL TAXES




USER FEES
–Taxes levied for the use of a good or service
EXAMPLES--ENTRANCE TO A NATIONAL PARK OR MUSEUM
TAXES COLLECTED BY STATES
(FEDERAL REVENUE SOURCES)
(STATE REVENUE SOURCES)
1--INTERGOVERNMENTAL REVENUES
HANDED DOWN FROM FEDERAL GOVERNMENT

(LOCAL GOVERNMENT REVENUE SOURCES)
TAXES COLLECTED BY LOCAL GOVERNMENTS
1--INTERGOVERNMENTAL REVENUES

HANDED DOWN FROM STATE/FEDERAL
USED FOR EDUCATION/PUBLIC WELFARE
2--They can us to Adjust our Behavior
3--They can affect our Productivity
2--SALES TAX
LEVIED ON MOST PURCHASES
5 STATES DO NOT COLLECT
ADVANTAGES
-
SIMPLE, EFFICIENT, CAN'T AVOID IT
DISADVANTAGES
--REGRESSIVE--HURTS THE POOR MORE THAN ANYONE
3--PENSIONS/RETIREMENT CONTRIBUTIONS
MOST STATES TAX THESE
4--STATE INCOME TAX
MOST STATES TAX INDIVIDUALS INCOMES


THESE RETURNS ARE ALSO DUE APRIL15TH
2--PROPERTY TAXES
3--UTILITIES/LIQUOR LICENSES
WATER, SEWAGE, ALCOHOL
4--SALES TAX
ADDITION TO STATE SALES TAX
VARIES COUNTY TO COUNTY/CITY TO CITY.

Taxes can affect one’s incentive to work harder.
Some people think “Why work harder if it means I’ll be taxed more.”
Examples:
Excise Tax on Gasoline
College tuition
Using HOT LANES on INTERSTATES
Sales Tax
ONLY paid if you BENEFIT from it
The
INCOME TAX
is an example
The idea is that people with higher incomes suffer less discomfort paying taxes than the poor
Taxes assessed based on a persons
INCOME
. More income=More tax.
INCOME TAXES
SALES TAXES ARE REGRESSIVE
Encourage—Tax incentives/rebates
EX. owning a home, electric cars, etc.
Discourage—Tax specific items like alcohol and cigarettes (called EXCISE TAXES or SIN TAXES)
Example-

CAPITAL GAINS COULD BE DIVIDENDS ON STOCK, PROFIT SELLING A HOUSE, INHERITANCES, ETC.

PAYROLL WITHHOLDING SYSTEM
– AUTOMATICALLY DEDUCTS TAXES FROM PAYCHECK
TAX RETURN
– MUST BE FILED BY INDIVIDUAL EACH YEAR BY APRIL 15TH
A
PROGRESSIVE
TAX
SOCIAL SECURITY
(6.2%)
INCOME FOR RETIRED, DISABLED, ETC.
MEDICARE
(1.45%)
HEALTH CARE PROGRAM FOR SENIOR CITIZENS
TWO PARTS
“CORPORATIONS DON’T PAY TAXES, INDIVIDUALS DO”
The embedded tax!
EXCISE TAX
– tax on the manufacture or sale of selected items
EXAMPLES--ALCOHOL, TOBACCO, GASOLINE

( S I N T A X E S )
LUXURY
–a tax on goods the government deemed a “Luxury”
EXAMPLES -- YACHTS, LUXURY CARS
ESTATE TAX
– tax on the transfer of property when someone dies.
ONLY HIGH VALUE PROPERTY
GIFT TAXES
– tax on donations of money or wealth paid by the person who makes the gift.
ANY GIFT OVER $13,000
CUSTOMS DUTY
– a tax levied on items brought into the country from other countries.
INTANGIBLE PERSONAL PROPERTY
-PROPERTY WITH "INVISIBLE" VALUE
EX. PATENTS, ART COLLECTIONS
VERY RARE
TANGIBLE PERSONAL PROPERTY
- ANY TANGIBLE PROPERTY OTHER THAN REAL
Ex. CARS, BOATS
REAL PROPERTY
—real estate, buildings, and anything permanently attached
Check out this information about excise taxes on Cigarettes
1 They can change how we spend or save...or
"ALLOCATE OUR RESOURCES"
(S O C I A L I N S U R A N C E)
TAXES EARNINGS AND CAPITAL GAINS
FUNDS TRANSPORTATION, HEALTH CARE, HIGHER EDUCATION (COLLEGE) ETC.
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