Wednesday, August 10, 2016

econ.- taxes (notes)

taxes: required payment to local/state/national government

revenue: income received by government from taxes & non-tax sources

tax base: income/property/good/service subject to a tax

3 tax structures: 
  1. proportional: constant % of income taken in tax as income rises
  2. progrressive: larger % of income taken in tax as income rises
  3. regressive: smallaer % of income taken in tax as income rises
individual income tax: tax on person's earnings

corporate income tax: tax on value of a company's profits

FICA: Federal Insurance Contributions Act
tax funds:
  • social security: old age, survivors, disability insurance
  • medicare: national health insurance program helps pay for healthcare for people 65+ or w certain disabilities 
entitlement program: social welfare program that people are "entitled to" if meet requirements

fiscal policy: use of government spending & revenue collection to influence economy

balanced budget: revenues = spending

budget surplus: situation in which the government takes in more than it spends

budget deficit: situation in which the government spends more than it takes in

deficit: amount of money government borrows from 1 budget
debt: sum of all government borrowing up to that time

constitutional powers that give federal government the power to tax:
expressed- (article 1, section 8, clause 1) basis for federal tax
limits to taxing: 
  • taxation clause- can't bring money that goes to individual interests
  • federal taxes same in every state
  • can't tax church bc 1st amendment
  • can't tax exports
characteristics of a good tax:
  • simplicity: easily understood
  • efficiency: government administrators collect taxes w/o spending too much time of money & taxPAYERS shouldn't spend too much time or money 
  • certainty: clear to taxpayer when it's due, how much, & how to pay
  • equity: tax system= fair. no one bears too much/little burden
why federal government withholds taxes from each paycheck: how much you will owe in federal income taxes

how they determine over/underpaid:
  • tax return: form used to file income taxes
  • taxable income: income on which tax must be paid = total income minus exemptions & deductions
  • personal exemptions: set amount subtracted from gross income for you/spouse/etc.
  • deductions: variable amount can subtract from gross income
taxes affect our behavior as consumers:
tax incentive: use taxation to encourage/discourage certain behaviors
sin taxes: discourage from tobacco/alcohol/etc.

  • spending on certain programs that are mandated/requited by existing laws
  • use for interest payments on national debt
  • spending category about which government planners can make choices
  • defense
  • education
the way state taxes are spent:
  • education: every state has at least 1 public state university, supports tech., colleges, community
  • public safety: police force enforces traffic laws, crime labs
  • highways & transportation: resurfacing roads, repairing bridges, waterways, airports
  • public welfare: hospitals, clinics, inspect water supplies & pollution
  • arts & recreation: state forests/parks, nature reserves, museums, art & music programs
  • administration: state government executive branch, legislature, court system, pay state workers, maintenance crews in parks, government & state court judges 
  • collect revenue: limits on state tax: constitution limits, can't tax imports/exports, federal property, nonprofit organizations, etc.
  • sales taxes: tax on goods/services, sin taxes, tax ranges depending on state
  • state income taxes: type of tax varies by state
  • corporate income tax: from companies, type of tax varies
  • other state taxes: licensing fees, transfer taxes (documents, certificates, transgerred & recorded), severance taxes (companies take resources from state), property (real estate, personal property)
local government: responsible for funding/running:
  • public school system
  • law enforcement
  • public facilities
  • parks
  • public health
  • transportation
  • elections
  • record keeping
  • social services
funding: property taxes, sales, excise, income taxes

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