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Copyright©2004 South-Western 12 The Design of the Tax System Hönnun skattkerfis
Copyright © 2004 South-Western/Thomson Learning “In this world nothing is certain but death and taxes.”... Benjamin Franklin Taxes paid in Ben Franklin’s time accounted for 5 percent of the average American’s income. 1789
Copyright © 2004 South-Western/Thomson Learning “In this world nothing is certain but death and taxes.”... Benjamin Franklin Today Today, taxes account for up to a third of the average American’s income.
Copyright © 2004 South-Western/Thomson Learning The Federal Government Individual Income Taxes The marginal tax rate is the tax rate applied to each additional dollar of income (skatthlutfallið sem á við fyrir hverja viðbótarkrónu sem viðkomandi fær í tekjur). Higher-income families pay a larger percentage of their income in taxes.
Copyright © 2004 South-Western/Thomson Learning The Federal Government Federal Government Spending Expense Category: Social Security National Defense Income Security Net Interest Medicare Health Other
Copyright © 2004 South-Western/Thomson Learning The Federal Government Financial Conditions of the Federal Budget (Fjárlög) A budget deficit (Halli á fjárlögum) occurs when there is an excess of government spending over government receipts. Government finances the deficit by borrowing from the public. A budget surplus (Afgangur á fjárlögum) occurs when government receipts are greater than government spending. A budget surplus may be used to reduce the government’s outstanding debts.
Copyright © 2004 South-Western/Thomson Learning TAXES AND EFFICIENCY Policymakers have two objectives in designing a tax system... Efficiency (skilvirkni, nýtni, hagkvæmni) Equity (réttlæti, sanngirni)
Copyright © 2004 South-Western/Thomson Learning Marginal Tax Rates versus Average Tax Rates The average tax rate is total taxes paid divided by total income. The marginal tax rate (jaðarskattur) is the extra taxes paid on an additional dollar of income.
Copyright © 2004 South-Western/Thomson Learning Lump-Sum Taxes A lump-sum tax (skattur greiddur í einni greiðslu, óháð tekjum) is a tax that is the same amount for every person, regardless of earnings or any actions that the person might take.
Copyright © 2004 South-Western/Thomson Learning TAXES AND EQUITY How should the burden of taxes be divided among the population? How do we evaluate whether a tax system is fair?
Copyright © 2004 South-Western/Thomson Learning Benefits Principle The benefits principle is the idea that people should pay taxes based on the benefits they receive from government services. An example is a gasoline tax: Tax revenues from a gasoline tax are used to finance our highway system. People who drive the most also pay the most toward maintaining roads.
Copyright © 2004 South-Western/Thomson Learning Ability-to-Pay Principle The ability-to-pay principle is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. The ability-to-pay principle leads to two corollary notions of equity. Vertical equity Horizontal equity
Copyright©2004 South-Western 12 The Design of the Tax System.
© 2007 Thomson South-Western. “In this world nothing is certain but death and taxes.”... Benjamin Franklin Taxes paid in Ben Franklin’s.
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Design of the Tax System Chapter 12 Copyright © 2001 by Harcourt, Inc. All.
The Design of the Tax System Chapter 12. “ In this world nothing is certain but death and taxes. ”... Benjamin Franklin Taxes paid.
12 The Design of the Tax System. “In this world nothing is certain but death and taxes.”... Benjamin Franklin Taxes paid in Ben Franklin’s.
© 2007 Thomson South-Western 11. THE TAX SYSTEM. © 2007 Thomson South-Western U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of Oct. 12, 2011.
Principles of Microeconomics : Ch.12 Second Canadian Edition Chapter 12 The Design of the Tax System © 2002 by Nelson, a division of Thomson Canada Limited.
The Design of the Tax System Chapter 12. IN THIS CHAPTER YOU WILL... 1.Get an over view of how the U.S. government raises and spends money 2. Examine.
12 The Design of the Tax System. What’s in this chapter? How does the US government raise money and what does it do with it? Is our tax system efficient?
Chapter 12 The Design of the Tax System. Objectives 2.) Understand the efficiency cost of taxation. 3.) Learn the criteria for evaluating the equity of.
Taxes Chapter 12 Issues of Efficiency and Equity.
The Design of the Tax System 1. 2 Government Revenue as a Percentage of GDP This figure shows revenue of the federal government and of state and local.
Harcourt Brace & Company Chapter 12 The Design of the Tax System (pp )
The design of the tax system Chapter 12. A financial overview of the U.S government Amazingly, the U.S federal government collects 2/3 of the taxes in.
The Tax System Most people agree that taxes should impose as small a cost on society as possible. The tax system should be efficient and equitable.
The Tax System Chapter 12. What Are Taxes and When Do You Have to Pay Them? Taxes are payments to local, state or national governments. They are the government’s.
Tax Efficiency. Policymakers have two objectives in designing a tax system... Ê Efficiency Ë Equity.
PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University The Design of the Tax System 1 © 2011 Cengage Learning. All Rights Reserved.
The Design of the Tax System 1. Financial Overview of Government Government revenue - increased –As percentage of total income –As economy’s income has.
Government budget and Taxes. Direct taxes: these take money directly from people’s incomes or from companies’ profits, – Income tax – payable on income.
Chapter The Design of the Tax System 12. Table Total government tax revenue as a percentage of GDP 1 2 Sweden France United Kingdom Germany Canada Brazil.
Nontax Revenues and Borrowing Nontax Revenues Nontax revenues come from a variety of sources, including canal tolls; fees for passports, copyrights, and.
UNIT I: THE EXECUTIVE BRANCH CHAPTER 16 – FINANCING GOVERNMENT U.S. Government.
Chapter 6 Understanding Taxes Philosophies of Taxation –Benefits received Citizens who receive benefits of expenditure should help pay the cost Example:
Government Finances: Fiscal Policy, Taxing and Spending Fiscal Policy Government Budget Federal Government Revenue Federal Government Expenditures State.
Taxes and Taxation “In this world, nothing is certain but death and taxes.” Ben Franklin.
Taxes and Spending Chapter 14. SECTION 1 Taxes Three Major Federal Taxes The government collects three major federal taxes: personal income tax, corporate.
Chapter The Design of the Tax System 12. Financial Overview of U.S. Government Government revenue – As percentage of total income – Increased – As economy’s.
Presentation Pro © 2001 by Prentice Hall, Inc. Financing Government.
Taxes Tax Requires payment to local, state, or national government *** IRS (Internal Revenue Service )is in charge of Federal Taxes.
Section 3.6 I.B. Economics Taxation Descriptive Overview: Students will describe the most common types of taxes levied by the government. Students.
American Citizenship Financing Government Chapter 16 Notes.
Today’s Schedule – 11/15 Defining Taxes PPT Tax Forms Tax Goals Research HW – Read 14.2.
Chapter: 7 >> Krugman/Wells Economics ©2009 Worth Publishers Taxes.
1 Chapter 22 The Public Sector Key Concepts Key Concepts Summary Practice Quiz Internet Exercises Internet Exercises ©2002 South-Western College Publishing.
Taxing and Spending Chapter 14. So what are the major taxes and what do they pay for? Personal Income Tax Corporate Income Tax Social Security Sales.
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 20 DEFICIT FINANCE.
Financial Literacy Mr. Rotella. Why do we have a federal income tax? National Defense, Social Security, Medicare, Income Assistance, Environment,
CONTEMPORARY ECONOMICS© Thomson South-Western LESSON 14.1 SLIDE 1 Government Spending, Revenue, and Public Choice Public Goods and Taxation 14.2.
Jump to first page Chapter 24 Taxes and Spending Norton Media Library Nariman Behravesh Edwin Mansfield.
The Economy Ms. Dennis & Mr. Patten Participation in Government.
Budget Deficit and National Debt A budget deficit exists when the federal government spends more than they are receiving in revenues within the year. When.
Sources of Federal Revenue Chapter 14 pp
Chapter Nine Financial Statement Analysis © 2015 McGraw-Hill Education.
Types of Taxes. Impact of Taxes How do taxes affect the decisions you make? Resource Allocation- Whenever a tax is placed on a good or service, it raises.
Section 2 - What Are Taxes and How Should They Be Levied? “The hardest thing in the world to understand is the income tax.” Albert Einstein Taxes: The.
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