Tax Act
56 cards by JS star created on 2013/11/29

56 cards
 Study this
About this Set:
No description has been added.
Available for:
Everyone
Language:
 Front of Card : English
 Back of Card : English

1
Who cares about taxes?
Examples
Answer
 businesses, politicians, individuals
Explanation

2
What Qualifies as a Tax?
Examples
Answer
 A tax is a payment required by a government agency that is unrelated to any specific benefit or service received from the government agency.
Explanation

3
Key components of a tax:
Examples
Answer
 1. Payment required.
Explanation

4
Key components of a tax:
Examples
Answer
 2. Payment imposed by government agency (federal, state, local).
Explanation

5
Key components of a tax:
Examples
Answer
 3. Payment not tied directly to benefit received by the taxpayer.
Explanation

6
To calculate a tax, a taxpayer must know:
Examples
Answer
 Tax Rate: level of taxes imposed on the tax base and is usually expressed as a percentage.
Explanation

7
To calculate a tax, a taxpayer must know:
Examples
Answer
 Tax Base: defines what is actually taxed and is usually expressed in monetary terms.
Explanation

8
To calculate a tax, a taxpayer must know:
Examples
Answer
 Tax = Tax Base * Tax Rate
Explanation

9
Different Ways to Measure Tax Rates
Examples
Answer
 Marginal tax rate: the tax rate that applies to the next additional increment of a taxpayer's taxable income.
Explanation

10
Different Ways to Measure Tax Rates
Examples
Answer
 Average tax rate: the taxpayer's average level of taxation on each dollar of taxable income.
Explanation

11
Different Ways to Measure Tax Rates
Examples
Answer
 Average tax rate = total tax ÷ taxable income
Explanation

12
Different Ways to Measure Tax Rates
Examples
Answer
 Effective tax rate: the taxpayer's average rate of tax on each dollar of total income (both taxable and nontaxable).
Explanation

13
Different Ways to Measure Tax Rates
Examples
Answer
 Effective tax rate = total tax ÷ total income
Explanation

14
Different Ways to Measure Tax Rates
Examples
Answer
 Relative to the ATR, the ETR provides a better depiction of a taxpayer's tax burden because it includes all income earned.
Explanation

15
Bill and Mercedes have $140,000 of taxable income and additional $10,000 of nontaxable income. Using the 2011 MFJ rates, what is their:
Examples
Answer
 Tax due = 27,269.50.
Explanation

16
Average tax rate.
Examples
Answer
 $27,269.50 = $27,087.50 + 28% x ($140,000  $139,350)
Explanation

17
Marginal tax rate.
Examples
Answer
 Average tax rate: 19.48% (27,269.50/140,000)
Explanation

18
Marginal tax rate.
Examples
Answer
 Effective tax rate: 18.18% (27,269.50/150,000)
Explanation

19
Marginal tax rate.
Examples
Answer
 Marginal tax rate: 28%
Explanation

20
Tax Rate Structures
Examples
Answer
 Proportional tax rate (flat tax): imposes a constant tax rate throughout the tax base.
Explanation

21
Tax Rate Structures
Examples
Answer
 Progressive tax rate: imposes an increasing marginal tax rate as the tax base increases.
Explanation

22
Tax Rate Structures
Examples
Answer
 Regressive tax rate: imposes a decreasing marginal tax rate as the tax base increases.
Explanation

23
Examples of proportional, progressive, regressive tax rate structures
Examples
Answer
 Proportional tax rate:Sales tax.
Explanation

24
Examples of proportional, progressive, regressive tax rate structures
Examples
Answer
 Progressive tax rate:Federal and state income taxes. Average tax rate will always be less than or equal to
Explanation

25
Examples of proportional, progressive, regressive tax rate structures
Examples
Answer
 the marginal tax rate. Regressive tax rate:Social Security.
Explanation

26
Types of Taxes
Examples
Answer
 1. Federal Taxes, 2. State and Local taxes
Explanation

27
Federal taxes (types of taxes)
Examples
Answer
 1. Income taxes: (largest)
Explanation

28
Federal taxes (types of taxes)
Examples
Answer
 2. Employment and unemployment taxes:
Explanation

29
Federal taxes (types of taxes)
Examples
Answer
 3. Excise taxes.
Explanation

30
Federal taxes (types of taxes)
Examples
Answer
 4. Transfer taxes.
Explanation

31
Federal taxeslargest group
Examples
Answer
 Income Taxes:Represents approximately 51.6% of all tax revenues collected in the United States.Levied on individuals, corporations, estates, and trusts.
Explanation

32
Federal taxes2nd largest group
Examples
Answer
 Employment and unemployment taxes:Second largest group of taxes imposed by the U.S. government.
Explanation

33
Federal taxes2nd largest group
Examples
Answer
 Employment taxes include the:1.OASDI (Social Security tax)2. MHI tax (Medicare tax).
Explanation

34
Federal taxes2nd largest group
Examples
Answer
 Unemployment taxes fund temporary unemployment benefits for individuals terminated from their jobs without cause.
Explanation

35
Federal taxes3rd largest group
Examples
Answer
 Excise Taxes:Third largest group of taxes imposed by the US government. Levied on the retail sale of particular products. Tax depends on quantity of products purchased. >Gasoline, alcohol, diesel fuel, telephone services. Producer of product pays the tax.
Explanation

36
Federal taxessmallest group
Examples
Answer
 Estate and gift taxes:Levied on the fair market values of wealth transfers upon death or by gift.
Explanation

37
State and local taxes
Examples
Answer
 1. Sales and use taxes.
Explanation

38
State and local taxes
Examples
Answer
 2. Property taxes.
Explanation

39
State and local taxes
Examples
Answer
 3. Income taxes.
Explanation

40
State and local taxes
Examples
Answer
 4. Excise taxes.
Explanation

41
State and local taxessales and use taxes
Examples
Answer
 Tax base for a sales tax is the retail sales of goods and some services. Tax base for the use tax is the retail price of goods owned, possessed or consumed within a state that were not purchased within the state.
Explanation

42
State and local taxesproperty taxes (2 types of property taxes)
Examples
Answer
 Property taxes are ad valorem taxes, meaning that the tax base for each is the fair market value (FMV) of the property. 1. Real property taxes: consists of taxes on land and structures permanently attached to land.
Explanation

43
State and local taxesproperty taxes (2 types of property taxes)
Examples
Answer
 Property taxes are ad valorem taxes, meaning that the tax base for each is the fair market value (FMV) of the property. 2. Personal property taxes: includes taxes on all other types of property, both tangible and intangible.
Explanation

44
Property taxes (state and local taxes) are
Examples
Answer
 ad volorem taxes: meaning that the tax base for each is the fair market value (FMV) of the property
Explanation

45
State and local taxesincome taxes
Examples
Answer
 Most state taxable income calculations largely conform to the federal taxable income calculations, with a limited number of modifications.
Explanation

46
State and local taxesexcise taxes
Examples
Answer
 States typically impose excise taxes on items subject to federal excise tax.
Explanation

47
Sufficiency (evaluating different tax systems)
Examples
Answer
 assessing the size of the tax revenues needed and making sure that the tax system provides these revenues. need sufficient revenues to pay for governmental expenditures for a defense system, social services, etc.
Explanation

48
Equity: 2 types (evaluating different tax systems)
Examples
Answer
 Equity="Fairness", how should the tax burden be distributed across taxpayers; a tax system is considered fair if the tax is based on the taxpayer's ability to pay. 1. horizontal equity, 2. vertical equity
Explanation

49
Horizontal Equity
Examples
Answer
 2 taxpayers in similar situations pay the same tax.
Explanation

50
Vertical Equity
Examples
Answer
 taxpayers with greater ability to pay tax pay more tax than taxpayers with less ability to pay.
Explanation

51
Evaluating Different Tax Systems: A good tax system should? (3 things)
Examples
Answer
 1. certainty
Explanation

52
Evaluating Different Tax Systems: A good tax system should? (3 things)
Examples
Answer
 2. convenience
Explanation

53
Evaluating Different Tax Systems: A good tax system should? (3 things)
Examples
Answer
 3. economy
Explanation

54
Certainty (evaluating different tax systems)
Examples
Answer
 taxpayers should be able to determine when to pay the tax, where to pay the tax, and how to determine the tax.
Explanation

55
Convenience (evaluating different tax systems)
Examples
Answer
 tax system should be designed to facilitate tax collection without undue hardship to the taxpayer.
Explanation

56
Economy (evaluating different tax systems)
Examples
Answer
 should minimize the compliance and administration costs associated with the tax system.
Explanation