Honors economics taxation
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HONORS ECONOMICS TAXATION. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. GOVERNMENT AS ORGANIZED CRIME. GOVERNMENT = ORGANIZED CRIME  PROTECTION FOR MONEY ROVING BANDITS – TAKE 100 % OF THE WEALTH TAKE THE MONEY & RUN

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HONORS ECONOMICS TAXATION

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Honors economics taxation

HONORS ECONOMICS

TAXATION


Honors economics taxation

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Honors economics taxation

GOVERNMENT AS ORGANIZED CRIME

GOVERNMENT = ORGANIZED CRIME  PROTECTION FOR MONEY

ROVINGBANDITS – TAKE 100% OF THE WEALTH TAKE THE MONEY & RUN

STATIONARYBANDITS – TAKE LESS THAN 100%


Honors economics taxation

ARE AMERICANS OVERTAXED?


Deadweight losses

INCOME

DEADWEIGHT LOSSES

TAXES INCREASE PRICE OF GOODS & SERVICES

TAXING WAGES  HIGHER PRICE FOR LABOR

TAXING CAPITAL  HIGHER COST OF INVESTMENT

HIGHER PRICE  LOWER QUANTITY DEMANDED  REDUCTION IN SUPPLY LESS ECONOMIC ACTIVITY / LOWER GROWTH

TAX RATE


Current budget

CURRENT BUDGET


Laffer curve

LAFFER CURVE

GOVERNMENTS WANT TO MAXIMIZE REVENUES

REVENUES = TAX RATE * ECONOMIC ACTIVITY

HIGHER TAXES  LESS ECONOMIC ACTIVITY  LOWER NET REVENUE

CUTTING TAXES  MORE ECONOMIC ACTIVITY  HIGHER NET REVENUES


Vertical and horizontal equity

  • EFFECTIVE CORPORATE TAX RATES ON DIFFERENT SECTORS, 1981

  • AVERAGE20.5 %

    • CAPITAL-INTENSIVE SECTORS

      • MINING9.4 %

      • PAPER & LUMBER4.0%

      • TRANSPORTATION-4.8%

      • UTILITIES11.5%

      • AEROSPACE13.5%

      • CHEMICALS13.6 %

    • LABOR-INTENSIVE SECTORS

      • PUBLISHING & PRINTING36.3 %

      • TOBACCO31.4 %

      • FOOD RETAILERS (GROCERY STORES)30.8%

      • NON FOOD RETAIL (DEPARTMENT STORES)22.0 %

    • HIGH TECHNOLOGY

      • ELECTRONICS & APPLIANCES29.3 %

      • OFFICE EQUIPMENT26.7 %

    • FINANCIAL

      • COMMERCIAL BANKS-12.6%

VERTICAL AND HORIZONTAL EQUITY

HOW DO YOU KNOW IF TAXES ARE FAIR?

VERTICAL EQUITY – SHOULD DIFFERENT INDIVIDUALS BE TAXED SIMILARLY OR DIFFERENT

  • BENEFIT PRINCIPLE – TAXED RELATIVE TO BENEFIT

    Ex. TOLL ROADS, HUNTING LICENSES, SSI EXEMPTIONS

  • ABILITY TO PAY PRINCIPLE – HIGHER INCOME = HIGHER TAX RATE

    **********************************

    PROGRESSIVE : BURDEN HEAVIER ON HIGHER INCOMES

    Ex. INCOME & CORPORATE TAXES

    REGRESSIVE: BURDEN HEAVIER ON LOW INCOMES

    Ex. PAYROLL & CONSUMPTION TAXES

    ************************************

    HORIZONTAL EQUITY: EQUAL INCOME = EQUAL TAXES

    $1 EARNED TEACHING = $1 EARNED NURSING

    $1 SPENT ON CIGARETTES = $1 SPENT ON CANDY


Types of taxes

TYPES OF TAXES

INCOME TAXES: (PROGRESSIVE) TAXES PROFITS OR NET INCOME  FUNDS FEDERAL DISCRETIONARY REVENUES

PAYROLL TAXES: (REGRESSIVE) TAXES EARNINGS FOR NON-DISCRETIONARY ENTITLEMENT PROGRAMS SUCH AS SOCIAL SECURITY & MEDICAID

PROPERTY TAXES: (REGRESSIVE) TAXES THE ASSESSED VALUE OF ASSETS INCLUDING REAL ESTATE FOR LOCAL GOVERNMENT EXPENSES SUCH AS SCHOOLS, FIRE, & POLICE DEPARTMENTS

EXCISE TAXES: (REGRESSIVE) “SIN” TAXES THAT TARGET CONSUMPTION OF SPECIFIC ITEMS SUCH AS TOBACCO, ALCOHOL, & IMPORTED GOODS.

SALES TAXES: (REGRESSIVE) TAXES SPENDING TO SUPPORT STATE & LOCAL GOVERNMENTS

USER FEES: TAXES SPECIFIC GOVERNMENT SERVICES  TOLL ROADS (THRUWAY / BRIDGES), LICENSES (HUNTING / DRIVING)

INFLATION & INTEREST RATES : (PROGRESSIVE/REGRESSIVE)

INFLATION SHIFTS WEALTH FROM CREDITORS  DEBTORS

INTEREST RATES SHIFT WEALTH DEBTORS CREDITORS


Are american taxes fair

ARE AMERICAN TAXES FAIR?


Corporate income taxes

CORPORATE INCOME TAXES

BUSINESSES ORGANIZE AS PARTNERSHIPS OR LIMITED LIABILITY CORPORATIONS

CORPORATIONS ARE “LEGAL INDIVIDUALS” THAT SHIELD OWNERS (STOCKHOLDERS) FROM BUSINESS DEBTS & LOSSES

**************

FOR THIS PRIVILEGE, GOVERNMENTS CHARGE A “FEE” BY TAXING CORPORATE PROFITS LIKE INDIVIDUAL INCOME

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HIGHER TAXES  DISINCENTIVE TO INVESTMENT, CAPITAL ACCUMULATION & ECONOMIC GROWTH

****************

THEREFORE, GOVERNMENTS HAVE CUT CORPORATE TAXES TO PROMOTE ECONOMIC GROWTH


Capital gains taxes

CAPITAL GAINS TAXES

CAPITAL GAIN = APPRECIATION IN VALUE IN AN ASSET (STOCK) BETWEEN BUYING & SELLING

CONSERVATIVES  “DOUBLE TAXATION” BECAUSE THEY ARE TAXED AS BOTH

  • CORPORATE INCOME

    b) CAPITAL GAINS

    HOWEVER . . .

  • INDIVIDUALS CAN TIME WHEN TO “REALIZE” A CAPITAL GAIN BY CHOOSING WHEN THEY MONETIZE (SELL) THEIR ASSET

  • CAPITAL GAINS TAXED LOWER THAN INCOME  INVESTORS PAY LOWER TAXES THAN WAGE EARNERS

  • CAPITAL DEPRECIATION / LOSSES ARE BOOKED CONTINUOUSLY BY A STATUTORY AVERAGE  SIGNIFICANT TAX ADVANTAGES


  • Pigovian excise taxes

    PIGOVIAN & EXCISE TAXES

    WHEN A DEMAND CURVE IS VERTICAL, CHANGES IN PRICE WILL NOT CHANGE THE QUANTITY DEMANDED

    “SIN TAXES” (EXCISE TAXES) ON ADDICTIVE BEHAVIOR : TOBACCO, ALCOHOL, GASOLINE & GAMBLING = GOOD REVENUE SOURCES

    INHERITANCE TAXES  CANNOT AVOID DYING

    YOU MAY ALSO TAX TO DISCOURAGE BEHAVIOR – FINES, SPEEDING TICKETS, CARBON & CALORIE TAXES

    PIGOVIAN TAX: HIGHER TAXES = HIGHER SOCIAL WELFARE

    ***********************************

    TAX EXPENDITURE: TAX DEDUCTIONS TO ENCOURAGE BEHAVIOR: MORTGAGE INTEREST, HEALTH BENEFITS, EDUCATIONAL COSTS


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