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Revenue Sources

Revenue Sources. Chapter 8. Income Sources. Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts. Compulsory Income. Secured by government organizations Collected through taxing & regulatory powers at different government levels

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Revenue Sources

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  1. Revenue Sources Chapter 8

  2. Income Sources • Compulsory Income • Gratuitous Income • Earned Income • Investment Income • Contractual Receipts

  3. Compulsory Income • Secured by government organizations • Collected through taxing & regulatory powers at different government levels • Why do commercial agencies care?? • Types of taxes…??

  4. Compulsory Income • Real property tax • Personal property tax • Sales tax • Excise tax • Income tax • Local option tax

  5. Question… How is an individual’s property taxes determined?

  6. Compulsory Income • Real property taxes • Land & whatever is developed or growing on the land • Different rates for different levels • Personal home, business, undeveloped land, farm • 96% of property taxes stay locally

  7. Compulsory Income • Real property taxes • Understand assessed value, tax abatement, tax base • Value defined by a realtor/appraiser/tax assessor • Fair market value • Assessed value – 30-50% lower than FMV (1/3 in IL) • A.V=Taxable worth

  8. Fair market value = $180,000 listing • Assessed Value = $60,000 ($180,000 / 3)

  9. Compulsory Income • Real property taxes • Tax abatement • Exemption from paying taxes • Specific time period • New business incentive

  10. Compulsory Income • Real property taxes • Tax base • Total assessed property value of all taxable property in a community • Bloomington vs. Hudson • Exemptions – NPOs, churches, universities, museums….

  11. Compulsory Income • Real property taxes • Tax rates formula Tax rate = Required taxes / net assessed valuation Required taxes = * Set from budget (ie. $5,000,000) * Expenditures – revenues (excluding taxes) * Where does a city get revenue?

  12. Compulsory Income • Real property taxes • Tax rates formula Tax rate = Required taxes / net assessed valuation Net assessed valuation= Total assessed valuation of com. 410,500,000 Tax exempt property (abatements)- 10,500,000 Net assessed valuation $400,000,000

  13. Compulsory Income • Real property taxes • Tax rates formula Required taxes/net assessed valuation=tax rate $5,000,000 / $400,000,000 = 0.0125 (1.25%) Also read as $1.25 per $100 assessed value

  14. Compulsory Income • Real property taxes • Tax rates formula Tax rate = 0.0125 AV: $100,000 home x 0.0125 = $1,250 tax bill AV: $150,000 home x 0.0125 = $1,875 tax bill

  15. Town of Normal Eg

  16. FYI… • Monday – meet in ITDC 103B • Read one of the linked articles

  17. Compulsory Income • Real property taxes • Personal property taxes • Sales taxes • Excise tax • Income tax • Local option tax

  18. Compulsory Income • Personal Property taxes • Allowed in 41 states (not IL) • 1. Household tangible property • Autos, $, livestock, furniture • 2. Business tangible property • Inventory, business fixtures, furniture, equip • 3. Intangibles • Stocks & bonds

  19. Town of Normal Eg • 0.75% Use tax on titled items • cars, boats, motorcycles • Supports General fund

  20. Compulsory Income • Real property taxes • Personal property taxes • Sales taxes • Excise tax • Income tax • Local option tax

  21. Compulsory Income • Sales taxes • Largest source of state tax revenue • Second largest for cities • Imposed on the sale of tangible goods • At-home food & drugs exempt • DE, MT, NH, OR – no sales tax • Range 4-10% • 1-2% stays with local government

  22. Compulsory Income • Sales taxes • Dedicated sales tax • MO State Parks (1/10 of ea. Cent) • Have no entrance fees • Used to fund Bank One Ballpark & renovate Packer Stadium • Rural towns vs. tourism towns • Boulder, CO & Wal-Mart • Normal vs. Honolulu…

  23. Tourism Town Comparisons • Honolulu County gives $80,000 credit to FMV. Rest is taxed. • Must pay a minimum of $100 in taxes • $180,000-$80,000=$100,000 AV

  24. Town of Normal Eg • The State of Illinois collects a sales tax at a rate of 7.5%, which is distributed as follows: • 5% to the State of Illinois • 0.25% to McLean County • 1.00% to the Town of Normal • 1.25% B-N home rule tax • Used for General Fund with a small % to support the Uptown Renewal Program.

  25. Compulsory Income • Real property taxes • Personal property taxes • Sales taxes • Excise tax • Income tax • Local option tax

  26. Compulsory Income • Excise taxes • Imposed on specific goods, services • Hotel-Motel tax • CVB’s • Sports facilities • 2% toward Spurs’ SBC Arena • Georgia Dome (3.7%) • Comiskey Park (2%) • IL Sports Facilities Hotel Tax… Why do this?

  27. Illinois Sports Facilities Hotel Tax • The Illinois Sports Facilities Authority imposes a tax on gross receipts from hotel operators within the City of Chicago. Receipts from permanent guests (occupants of 30 days or longer) are not taxed. Proceeds are used for the corporate purposes of the authority, including construction costs for the Comisky Baseball Park.

  28. Compulsory Income • Excise taxes • Car Rental tax • American Airline Center in Dallas • Atlanta Hawks Philips Arena • Sin taxes • Alcohol, cigarettes • Cleveland’s Jacob’s field, Gund Arena & Browns Stadium

  29. Town of Normal Eg

  30. Compulsory Income • Real property taxes • Personal property taxes • Sales taxes • Excise tax • Income tax • Local option tax

  31. Compulsory Income • Income taxes • Municipal, state & federal levels • IL = 3% flat tax with 1/11 going to municipalities • Suggested 4.5% - 50% increase • $50,000 - $1500 to $2250 ($750 or $62 per month) • IL = no state property taxes, rely on income taxes Which is more fair, property or income tax?

  32. Compulsory Income • Real property taxes • Personal property taxes • Sales taxes • Excise tax • Income tax • Local option tax

  33. Compulsory Income • Local option taxes • Applied at the local level • Legislatively enabled at the state level • Ie. Local home rule sales tax added to the state sales tax (1.25% in B-N)

  34. Income Sources • Compulsory Income • Gratuitous Income • Earned Income • Investment Income • Contractual Receipts

  35. Gratuitous Income • Received without expectation of return • Grants, bequests, sponsorships • Most often giver does not receive a direct benefit or compensation

  36. Gratuitous Income • Grants • LWCF – development of outdoor rec resources • OSLAD - Open Space Land Acquisition and Development • Illinois Transportation Enhancement Program

  37. Gratuitous Income • Bequests • Life insurance • Wills • ELM fund • Sponsorships & Donations • $$, land, equipment, stocks, bonds • See examples….

  38. Gratuitous Income • Nonprofit agencies • Rely on gratuitous • Public agencies • Rely on some forms of gratuitous • Grants & the need for a foundation • Commercial • Gives gratuitous income

  39. Income Sources • Compulsory Income • Gratuitous Income • Earned Income • Investment Income • Contractual Receipts

  40. Earned Income • Cash resources generated from fees & charges • Impacts all sectors

  41. Earned Income • Entrance fees • Well-defined but not necessarily enclosed areas • Botanical gardens, zoos • Admission fees • To enter a building, structure, designated area • Show, performance

  42. Earned Income • Rental fees • Pavilions, equipment

  43. Earned Income • User fees • Activity fees • Showmobile user fees…

  44. User Fees Eg. • Michigan DNR generated: • $24.9 million in camping revenues • $12.2million in gate receipts. • Accounts for almost 96% of their total revenue of $38.6 million • (NASPD, 2008)

  45. Earned Income • Sales • Goods & services through pro shops, concessions, etc. • Eg • Kentucky State Parks restaurants - $14.4 m/year • Tennessee – $8.5 m/year

  46. Earned Income • License & permit fees • Boat permits, snowmobile license,

  47. Earned Income • Special service fees • Handling fees • Lottery funds Attingham Park – Heritage Lottery Fund Colorado Lottery

  48. Earned Income • Special service fees • Luxury suite ($100,000 per) • Personal seat licenses (@$1000 per) • Pay for right to buy season tickets • Forfeit when you no longer buy season tickets • Transfer by gift, bequest or sale to third party

  49. Income – IL State Parks • Other sources: • Motor fuel tax • Snowmobile, ATV, boats, hunting license registration • Taxes on tobacco, sporting goods • Sales tax on tourism

  50. Income Sources • Compulsory Income • Gratuitous Income • Earned Income • Investment Income • Contractual Receipts

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