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30 Cards in this Set
- Front
- Back
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Tax base
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Defines what is actually taxed.
Usually expressed in monetary terms. A sandwich that costs $1.00 is a tax base |
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Tax Rate
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a level of taxes imposed on the tax base.
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Why should Individuals be in interest in Taxes?
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1. They Pay them!
2. Municipal bonds are state county or city bonds are exempt from income tax. State bonds are exempt from state taxes are exempt in the same state. 3. Tax Planning purposes. |
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What taxes do we see on our paychecks?
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Federal
State Social Security Taxes Medicare Taxes |
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Tax=
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Tax Base X Tax Rate.
100.00 x .0825 =8.25 |
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COLA
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Cost of Living Allowance. 3% now but it used to be 5%
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What is a Tax?
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A Tax has to be paid. You cannot get rid of it like bankruptcy.
Has to be imposed by the government the amount you pay is unrelated to the benefit or service received from the government. |
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What is the difference between a fee and a tax?
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A tax requires a vote, a fee doesnt require a vote.
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Earmarked Tax
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Tax that is assessed for a specific purpose. Gas Tax is EARMARKED for Highway. Gas tax is not going to fund the army, it is EARMARKED for the highway.
It is a tax because you have to pay for it. |
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Flat Tax
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Everybody pays the same percentage. It doesnt matter what you make.
The more you make the more you get tax. |
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problem with Flat taxes.
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No Deductions. You cannot deduct medical expenses or exemptions.
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How many homes can you deduct interest on?
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2 homes
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Graduated Tax
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Different Tax Rates in Different Tax Brackets.
1st $$ 2nd $$$ 3rd $$$$ Also called Progressive Tax. everybody pays the same rate on the same dollars. |
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Tax Brackets
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1st $$
2nd $$$ 3rd $$$$ Marginal Tax rate. |
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Tax Planning
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Trying to pay As little tax as you can.
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Average Tax Rate
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Taxpayers average level of taxation on each dollar of taxable income.
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Average Tax rate equation
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Total Tax/Taxable income
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Effective Tax Rate
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Taxpayers average rate of taxation on each dollar of total income (sometimes referred to as economic income)
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Effective Tax rate equation
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Total Tax/Total Income
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Estate Tax
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When you get something from your grandparents when they die. YOu have tpay on the value of the property.
Many ranchers/farmers who have to pay an estate tax which is extremely high and they have to sell the farm to make the tax at the market value. |
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What is the Top limit of Social Security?
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106,000 and there is not anymore to pay.
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Medicare Taxes Top Limit.
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NO LIMIT!
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Excise Taxes.
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Taxes based on quantity purchased. Alcahol
Diesel Fuel Tobacco |
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Differences between Taxes and Punishments.
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Taxes are not consequences. Punishments are consequences for doing something wrong. Everybody pays taxes.
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Why does the income tax allow deductions for charitable contributions and retirement plan contributions.
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Because if you dont give it to charity then it is the governments responsibility to do it so its an incentive to do it.
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Sin Taxes.
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Influence behavior. By Taxing Alcahol and Cigs you are discouraging behavior that leads to health risks and health costs in other areas. They dont want people with lower incomes to be drinking and smoking because then they have to use medicare to pay for it.
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Drinking is a different Matter than smoking. Why is the government concerned about more than health risks.
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It Causes Car accidents. which pose horrible things to society.
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What is the problem with Gambling..Buying lottery Tickets
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Gamblers have been known to be abusive and do not put enough money into things for the well being of their families. They will gamble it all away.
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what are the 3 different tax rates?
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Marginal= Change in tax/Change in tax rate
Average = Total Taxes/Taxable Income Effective (smallest) = Total Taxes/Total income |
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Whats the difference between proportional progressive and regressive tax rate structure?
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Proportional: Flat
Regressive: You Pay Higher Taxes at lower levels of income. Decreasing Marginal Tax rate. (social security) Progressive Tax: Goes higher at higher incomes. |
