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Tax Collection

“An ARTFUL taxman so plucks the goose as to obtain the most feathers for the least hissing.” Jean- Baptiste Colbert, treasurer to Louis XIV. Tax Collection. Unit 5 Macroeconomics.

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Tax Collection

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  1. “An ARTFUL taxman so plucks the goose as to obtain the most feathers for the least hissing.” Jean-Baptiste Colbert, treasurer to Louis XIV Tax Collection Unit 5 Macroeconomics

  2. Equality--the state of being equal, especially in status, rights, and opportunities.Equity--the quality of being fair and impartial.Need--circumstances in which something is necessary, or that require some course of action; necessity How do you create a “fair” tax collecting system?

  3. How to get the most feathers with least hissing? Three Types of Tax Structures: • Proportional Tax or “Flat Tax” • Progressive Tax • Regressive Tax I've been rich and I've been poor. Rich is better.Sophie Tucker

  4. 1. Proportional Tax Proportional Tax “Flat Tax” is a tax for which the percentage of income paid in taxes remains the same for all income levels % rich income = % poor income 15% = 15%

  5. 2. Progressive Tax Progressive Tax is a tax for which the percentage of income paid in taxes increases as income increases % income rich >% income poor 30% > 15%

  6. Federal-Individual-Individual-Income-Tax-Rate-Adjusted-for-InflationFederal-Individual-Individual-Income-Tax-Rate-Adjusted-for-Inflation

  7. 3. Regressive Tax Regressive Tax is a tax for which the percentage of income paid in taxes decreases as income increases % as income

  8. Regressive fines • In Idaho going 45 mph in a 30 mph zone is a $90 ticket • If you made $7.25 an hour you would need to work 12 hours to pay the fine • If you made $20 an hour you would only need to work 4.5 hours

  9. Driving 45 mph in a 30 mph zone

  10. Finland’s Progressive Fines • Finland’s system for calculating fines is relatively simple: • estimate of the amount of spending money a Finn has for one day, and then divides that by two—the resulting number is considered a reasonable amount of spending money to deprive the offender of. • based on the severity of the crime, the system has rules for how many days the offender must go without that money. • Going about 15 mph over the speed limit gets you a multiplier of 12 days, and going 25 mph over carries a 22-day multiplier.

  11. Which Type is Most Fair? • Benefits-received principle • A person should pay taxes based on the level of benefits he or she expects to receive • People who drive should pay a gas tax that is used to build and maintain highways • ID Hunting and fishing licenses would amount to the $77,253,271 it takes to run ID fish and game, not just $25,692,000 they take in

  12. Which Type is Most Fair? • Ability-to-pay principle • People should pay taxes according to their ability to pay • This is the idea behind the progressive tax—the more you make the higher the percentage you should pay

  13. Where Does the Gov Get its $$? • Individual income tax • Payroll (withholding) taxes—Social Security, Medicare and Unemployment taxes • Corporate income tax • Other taxes

  14. Top Revenue Sources of Federal Government:

  15. 1. Individual Income Tax • Biggest source of revenue$$ • Employers must take out FIT (Federal Income Tax) and in some states SIT (State Income Tax) • At the end of the year employers give employees a W-2 Form that shows how much income tax has been withheld and sent to the federal government

  16. There are 3 types of “withholding” taxes that are taken out before you get your paycheck: • Federal Income Taxes (FIT) • State Income Taxes (SIT) • Social Security and Medicare(FICA)

  17. 2. Social Security/Payroll/Withholding Taxes • Employers must take out FICA (Federal Insurance Contributions Act )taxes include Social Security and Medicare • Both employers and employees share FICA payments • 12.4% of income for the first $120,000 • Employers may take out for health insurance, retirement, etc.

  18. Pay-as-you-earn system means how much you will owe the federal government is estimated and divided among your paychecks

  19. 3. Corporate Income Tax • Corporations must pay federal income tax on their income • Businesses can take many deductions so determining a corporation’s tax income is complicated • Corporate income tax rates are progressive and range from 15%-34%

  20. 4. "Other Taxes”? • Excise tax • Gasoline, alcohol, tobacco, gambling • Estate tax • A tax on the value of the money and property of a person who has died • exemption amount $5,340,000 • Gift tax • A person can give up to $14,000 a year tax-free to each of several people • Import tax • Tariffs

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