Tax Revenue (Federal, State, and Local)
12/02-05
Tax Structures
Proportional (Flat) Tax
-tax that takes the same share of income at all income levels.
-Ex. Proportional income tax of 10 percent would tax all incomes at that rate
-Critics argue that such taxes fail the test of fairness, because they tax the rich and the poor the
same, even though the poor have less ability to pay than do the rich.
Progressive Tax
-tax that takes a larger share of income as income increases
-based on the ability-to-pay principle
-Most federal taxes, including the federal income tax, are progressive
-Critic believe that placing an unequal burden on the rich is fundamentally unfair
Regressive Tax
-a tax that takes a smaller share of income as income increases
-a tax that is proportionally can function as a regressive tax if it takes a bigger bite out of the
incomes of poor people than those of wealthy people.
-Critics argue that they turn the ability-to-pay principle on its head. Instead of taxing most
heavily those who are most able to pay, such taxes place the greatest burden on those least able
to pay.
Individual Taxes
Income Tax
-A tax levied on personal income earned from wages and returns on investments
Payroll Tax
-Taxes deducted directly from employee paychecks. Two largest payroll taxes fund Social
Security and Medicare.
Property Tax
-Taxes levied on the value of real property, such as land and homes, or on personal property,
such as cars and boats.
Tax Revenue (Federal, State, and Local)
12/02-05
Sales Tax
-A tax on the sale of goods, paid by the customer at the time of purchase. Most states and many
cities have a general sales tax.
Corporate Income Tax
-A tax on company profits.
Excise and Luxury Tax
-Taxes on the sale of certain goods, services, and high-priced luxury items. Called sin taxes
when applied to alcohol, cigarettes, and gambling.
User Fees and Tolls
-Taxes charged for the use of public facilities and services and for permits and licenses.
Estate and Inheritance Taxes
-Taxes levied on some or all of the estate (property and possessions) a person leaves behind at
death.
Tax Revenue-Federal
-In the year 2016, the federal government collected approximately $3,300, 000, 000, 000.
-Four Main Sources=$ 3.3 Trillion
-Individual Income Tax
-Payroll Tax
-Corporate Income Tax
-Excise Tax
-Government typically doesn’t collect enough tax revenue to fund all of its spending
(expenditures)
-​Federal Deficit​: the shortfall between tax revenues and government expenditures in a given
year.
-Government ​borrows money to make up for a federal deficit
-Treasury bills, savings bonds, and other government-issued certificates of debt
-​Fiscal Year​-October 1, 2016-September 30, 2017
-Federal Government Budget consists of ​mandatory spending​ and ​discretionary spending
-​Mandatory spending​: spending that is fixed by law
-only way for Congress to change the amount of money allocated to mandatory spending
Tax Revenue (Federal, State, and Local)
12/02-05
is to enact new legislation
-Consists of interest on the national debt and entitlements
-​National Debt​: the total amount owed by a nation’s government as a result of
borrowing
-​Entitlements​: program through which individuals receive benefits based on their
age, income or some other criteria
-Social Security, Medicare, and welfare
-​Discretionary Spending​: made up of expenditures that may be raised or lowered as Congress
sees fit
-biggest chunk is spent on National Defense
Tax Revenue-State and Local
-Revenue raised mainly through user fees and charges, individual and corporate income taxes,
property taxes, sales taxes, and aid from federal government
-Citizens play a much larger role in tax policy at state and local levels than at federal
-​Tax Referendums​: direct popular votes on an issue that will approve tax hikes
-Largest chunk of state and local government spending is towards education, public safety, and
social welfare