Term
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Definition
-deductible for employer
-Those with income less than $25,000 don't pay taxes on SS |
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Term
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Definition
| -deductible up to amount of winnings |
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Term
| Why do we have deductions? |
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Definition
1. equity
-hardship relief
2. efficiency wrt charitable giving
-help solve free rider problem for charities
-govt is indirectly subsidizing charities (avoids direct subsidy) |
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Term
| How to reduce distortions for Mortgage Interest |
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Definition
-Make all interest paid deductible
-have no interest paid deductible |
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Term
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Definition
-exclusion of an item that should not be excluded
-ex: home mortgage interest deduction
-included in calculating AMT |
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Term
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Definition
| -inclusion of an item that should not be included |
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Term
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Definition
-never included
-ex: interest on state and local bonds
-estimated that 1/3 of tax base is lost through tax expenditures and preferences |
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Term
| Alternative Minimum Tax: How it is calculated |
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Definition
1. Start w/ AGI
2. Add all deductions + exemptions
3. subtract #
-$48,000 for single
-$70,000 for married
4. AMT is what's left
5. People pay what's ever greater (AMT vs. regulaar |
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Term
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Definition
-a method to recapture revenue lost in loopholes
-wealthy taxpayers |
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Term
| Tax Rates: Efficiency and Equity |
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Definition
Efficiency: low marginal rates
Equity: high average rates
Really can't have both |
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Term
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Definition
-married is greater than 2x single amount
-But if 2 people get married and make very different amounts, more deductions are added and tax burden decreases
-Solution: different tax schedules/brackets for married people |
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Term
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Definition
-limited to 30% of AGI
-if you give capital gain property, limited to 20% of AGI |
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Term
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Definition
| -gains/losses in inflation situations aren't calculated as cap. gains/losses. But they should. |
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Term
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Definition
| -can use to offset liability to 0, but no furher and can carry over to next year |
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Term
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Definition
| -you can offset and go to negative liability and get $ back from government |
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Term
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Definition
| A tax credit is a sum deducted from the total amount a taxpayer owes to the state. |
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Term
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Definition
-deductible on federal income tax (may also be reverse)
-tend to be fairly low (competition) |
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Term
| Fed Government offered to collect tax for states. None signed up. Why? |
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Definition
-mistrust of Fed
-worried Fed govt will keep $
-Congress can change mind at any time |
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Term
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Definition
-deductible
-sales tax aren't
-4 states do not have income tax |
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Term
| Why not have state income tax? |
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Definition
-competition
-better sources of revenue |
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Term
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Definition
-levying taxes against people who are not residents
-ex: hotel tax |
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Term
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Definition
-corporation relocates to a vacant lot, builds plant,value goes up
-plant will be taxed as a vacant lot for a number of years to create incentive for moving there |
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Term
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Definition
At margin (not corner solution), they are equal.
-If we know a tax pays marginal tax rate, we can infer opportunity cost of donating time |
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Term
| Main Point about Tax Prices |
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Definition
| When calculating tax prices, you must be very careful about where income is coming from |
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Term
| Charitable deductions and deductions |
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Definition
| 12 percent of all deductions |
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Term
| Charitable orgs. sources of revenue |
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Definition
-sale of goods
-membership dues
-donations/gifts |
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Term
| Donations as % of Total Revenue |
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Definition
-Cultural : 91%
-Religious: 71%
-Educations: 34%
-Health: 2% |
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Term
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Definition
| how much it costs you to contribute for every dollar you give you get (1-marg tax rt) back in return |
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Term
| Tax Price and Charitable Giving |
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Definition
-If elasticity less than 1. When tax price goes down, individual gives less to charity
-If elasticity greater than 1. When tax price decreases, individual gives more to charity. |
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Term
| Expenditure Function (Feldstein) |
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Definition
P*Q=Expenditure
%dP+%dQ=%dExp |
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Term
| Price Elasticity of Demand |
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Definition
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Term
| Removing deductions for charitable contribution |
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Definition
-Set tax price=1
-small increase in tax revenue
-much larger decrease in charitable giving |
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Term
| Changing charitable contribution to tax credit |
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Definition
| -Dramatically changes the distribution of contributions |
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Term
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Definition
| Tax prices will not have as big of impact on charitable contributions as Feldstein's model |
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Term
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Definition
| Labor supply rate is much more elastic |
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Term
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Definition
-Major problem: doesn't account for tax rates
-Labor Force Participation:
-2 steps equation: whether to go into work, then how many hours to work
-selection problem: you don't have data for people who don't work |
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Term
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Definition
1. Models decision to work or not
2. Calculate odds that certain people who aren't working, will enter labor force
3. then put above equation that calculates how many ppl will work |
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Term
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Definition
-Primary earners: inelastic labor supply
-Secondary: very elastic supply
-intensive margin: inelastic
-extensive margin: elastic
-proportional income tax is wrong b/c labor bears more burden b/c it's relatively elastic |
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Term
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Definition
-$40,000 exemption
-20% rate
-take taxable income and add back accelerated depreciation reserve for losses on bad debts, etc |
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Term
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Definition
-46 states
-rates are low
-3 to 12 percent
-deductible, so actually 1 to 1.6 percent |
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Term
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Definition
| Taxes eventually fall on people, not corporations. Think Harberger Model. People bear burden of taxes through lower equity. |
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Term
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Definition
| Firms are entities; they have an ability to pay. We should tax them accordingly. |
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Term
| Justifications of Corporate Tax |
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Definition
1. Corps benefit from public goods
2. Taxes help to regulate monopolies |
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Term
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Definition
-One for taxpayers (Gross receipts are what are taxed)
-One for shareholders |
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Term
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Definition
Flow of income during year and subtract costs like labor and the depreciation of machines to get what should be taxed
The sooner you can depreciate, the less taxes you pay |
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Term
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Definition
| deduct c/n for n years; where c is capital |
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Term
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Definition
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Term
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Definition
10!=55
First year= (10/55)*100,000=$18,111 |
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Term
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Definition
-Accelerated Cost Recovery System
-tells you lifespan of every asset
-the sooner you can depreciate, the less taxes you pay |
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Term
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Definition
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Term
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Definition
autos, trucks, computers
-double declining balance, straight line |
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Term
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Definition
| books, furnitures, office equipment |
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Term
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Definition
| railroad track, utility equipment |
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Term
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Definition
railroad property
(150% straight line) |
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Term
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Definition
-further deduction that's a % of gross revenue
-bad for environment b/c later tax rate will increase
-incentive is to extract as fast as possible |
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Term
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Definition
-File annual return
-Individual is taxed on dividend |
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Term
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Definition
| Gives states access to the worldwide income of the corporation |
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Term
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Definition
used to determine state's share in a unitary tax.
-tax is passed onto shareholders, capital, consumers, etc
-hard to calculate efficiency and incidence of data |
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Term
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Definition
| the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold |
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Term
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Definition
the most recently produced items are recorded as sold first
-tax burden is less under this due to inflation |
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