taxes and the economy to understand the role of taxes in our economy
TRANSCRIPT
Taxes and the Economy
To understand the role of taxes in our economy
Two Basic Principles of Taxation
Benefits received principle – people benefit from the taxes they pay
Two Basic Principles of Taxation
Benefits received principle – people benefit from the taxes they pay– Ex. We pay a large tax on gas, and that tax foes to
maintain the roads which we use to drive on
Two Basic Principles of Taxation
Benefits received principle – people benefit from the taxes they pay– Ex. We pay a large tax on gas, and that tax foes to
maintain the roads which we use to drive on
Ability to pay principle – those who have the greatest income should pay the highest tax rates
Two Basic Principles of Taxation
Benefits received principle – people benefit from the taxes they pay– Ex. We pay a large tax on gas, and that tax foes to
maintain the roads which we use to drive on
Ability to pay principle – those who have the greatest income should pay the highest tax rates– Ex. Our income tax system
Two Other Characteristics
Sometimes the gov’t will give tax breaks to encourage growth, this is known as the productivity principle
Two Other Characteristics
Sometimes the gov’t will give tax breaks to encourage growth, this is known as the productivity principle– Ex. Gov’t will cut 10% of taxes if business upgrades
equipment
Two Other Characteristics
Sometimes the gov’t will give tax breaks to encourage growth, this is known as the productivity principle– Ex. Gov’t will cut 10% of taxes if business upgrades
equipment
Because the gov’t creates the taxes, they try to be hush-hush
Two Other Characteristics
Sometimes the gov’t will give tax breaks to encourage growth, this is known as the productivity principle– Ex. Gov’t will cut 10% of taxes if business upgrades
equipment
Because the gov’t creates the taxes, they try to be hush-hush– They will pass taxes upon those who are least likely
to be offended
Two Other Characteristics
Sometimes the gov’t will give tax breaks to encourage growth, this is known as the productivity principle– Ex. Gov’t will cut 10% of taxes if business upgrades
equipment
Because the gov’t creates the taxes, they try to be hush-hush– They will pass taxes upon those who are least likely
to be offended– Ex. Taxes on sale of alcohol and liquor “sin taxes”
The Burden of Taxes
Three ways to classify taxes
The Burden of Taxes
Three ways to classify taxes– Progressive – more you make, the more they take
The Burden of Taxes
Three ways to classify taxes– Progressive – more you make, the more they take– Regressive – less you make the more they take
The Burden of Taxes
Three ways to classify taxes– Progressive – more you make, the more they take– Regressive – less you make the more they take– Proportional – all pay the same percentage of their
income
Types of Taxes
Personal income tax, there are several brackets in this progressive system
10% (9K), 15% (36K), 25% (88K), 28% (183K), 33% (398K), 35% (399K), 39.6% ($400K)
Types of Taxes
Personal income tax, there are 3 brackets in this progressive system– Greatest source of income
Types of Taxes
Personal income tax, there are 3 brackets in this progressive system– Greatest source of income
Social Insurance Taxes, proportional tax is the 2nd greatest source of income
Types of Taxes
Personal income tax, there are 3 brackets in this progressive system– Greatest source of income
Social Insurance Taxes, proportional tax is the 2nd greatest source of income
Corporate income tax, 3rd greatest, range up to 36% of profits
State and Local Taxes
Sales tax is most important for the state
State and Local Taxes
Sales tax is most important for the state Property tax for the local
Where does the money go?
Where does the money go?
Remember, the gov’t is not out to turn a profit
Where does the money go?
Remember, the gov’t is not out to turn a profit Also, elected officials are try to please voters
(what is good politically is not always good economically)
Where does the money go?
Remember, the gov’t is not out to turn a profit Also, elected officials are try to please voters
(what is good politically is not always good economically)
About $1 out of $5 of the GDP is spent by the gov’t in 2001, Today it is about $1 out of every $3 of the GDP
President and the Budget
President prepares and delivers the budget to Congress
President and the Budget
President prepares and delivers the budget to Congress
By October 1st , that must be passed
President and the Budget
President prepares and delivers the budget to Congress
By October 1st , that must be passed Problem: In the 20th century, the gov’t
generally spent more money that it took in (deficit)
President and the Budget
President prepares and delivers the budget to Congress
By October 1st , that must be passed Problem: In the 20th century, the gov’t
generally spent more money that it took in (deficit)– Now they must collect more in taxes to begin to pay
off debts
President and the Budget
President prepares and delivers the budget to Congress
By October 1st , that must be passed Problem: In the 20th century, the gov’t
generally spent more money that it took in (deficit)– Now they must collect more in taxes to begin to pay
off debts– However, we have problems meeting the budget
each year (war on terror)