Taxes

Types of Taxes Proportional Tax Progressive Tax Regressive Tax

Proportional Tax Imposes the same percentage rate of taxation on everyone, regardless of income. If income tax rate is 15%, everyone pays 15%.

Progressive Tax A tax that imposes a higher percentage rate of taxation on persons with higher incomes.

Regressive Tax Tax that imposes a higher percentage rate of taxation on low incomes than on high incomes.

Ability-to-pay principle The belief that people should be taxed according to their ability to pay, regardless of the benefits they receive. Makes paying taxes “fair.”

Benefit principle Those who benefit from government goods and services should pay in proportion to the amount of benefits they receive.

Tie the tax to those who use that good or service the most. Doesn’t tax those who do not use a particular good or service.

Criteria for Effective Taxes Equity Simplicity Efficiency

Individual Income Tax Created by the 16th Amendment to the Constitution in 1913. Most used tax by the government to finance its operations.

How its paid Payroll Deductions Progressive Income Tax Indexing

Payroll Deductions Payroll withholding system IRS receives the payments Tax return is filed at the end of the year by April 15th to cover any taxes that have not been paid or to return any extra money paid.

Forms

W-2 Form http://http-download.intuit.com/http.intuit/CMO/payroll/Anatomy%20of%20a%20W-2_v2.pdf

Indexing An upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation.

FICA Taxes-Federal Insurance Contributions Act FICA tax is made up of several insurances: Old Age, Survivors, Disability and Hospital insurance. Old Age, Survivors and Disability portion is deducted through the social security tax. The Hospital insurance is deducted through the Medicare tax. As an employee, this tax will automatically be deducted from your earnings by your employer The total FICA tax rate is 7.65%, which includes the Social Security tax rate of 6.2% and the Medicare tax rate of 1.45%. The maximum amount of Social Security tax employees and employers will each pay is $6,621.60 in 2010. 

State Taxes Georgia State sales tax is 4%. Henry Co sales tax is 3% TOTAL—7% Personal Income tax—6% if earnings are over $7,000.

Corporate Income Taxes Tax a corporation pays on its profits. Taxed the same way as an individual, but they are taxed separately from individuals.

Current Events??? What issue is in the news regarding taxes?

Questions