OK! This is my lecture on the vocabulary: 1-5 Chapters 9,10,
& 14.
Slide 3
ABILITY TO PAY PRINCIPLE OF TAXATION #1 Keep in mind that this
is a theory of taxation or a model; make note of thatit is NOT a
tax in itself Ok, the idea is the more you make the more they take.
They being the government. Part 1 of the definition: A person pays
tax based upon the amount of money earned. Part 2 of the
definitions: regardless of benefits received. This sounds good but
think about the ramifications.
Slide 4
Tom and Jackson Tom has a 6 figure income a large house on a
good chunk of property a three-car garage with a large boat parked
near it a double-wide circular drive way (always wanted one) and NO
children
Slide 5
Jackson Jackson has a wife and4 kids a three-bedroom apartment
a job earning minimum wage a rather large headache
Slide 6
Who pays?? Lets think about school taxes Children receive the
benefit of a free public school education through school taxes
which are based upon property value
Slide 7
Tom Pays through the nosein other wordshe pays a lot in school
taxes because he owns propertyhe has no childrenhe does not reap
the reward or benefit of his school taxes, directly
Slide 8
Jackson Jackson pays no school/property taxes because he rents;
he owns no property. (His landlord may increase the rent for all
tenants in order to pay his bill but no tenant receives a bill from
the tax office. ) And yet, Jackson has 4 children in school,
reaping the benefit of those tax dollars.
Slide 9
How does Tom feel? Well, he could feel really, really ticked
off. He could feel good that he is helping out his fellow man, a
universal good! He might realize that his grandparents paid taxes
when they no longer had anyone in schoolwhat goes around comes
around.
Slide 10
What is this called again? It is called the ability-to-pay
principle of taxation. You can afford to pay moreso, you do!
Slide 11
Benefit principle of taxation (translation of definition) Those
who receive the benefits should pay for them, the more you receive
the more you should pay Now that makes perfect sense does it not?
OK! Lets think about that in terms of Tom & Jackson.
Slide 12
has no children and therefore pays no school taxes.
Slide 13
Jackson has children. If he had one child; he pays for that one
child. If he had two children; he pays for the two children. has 4
children. Therefore.. Problem? Jackson cannot afford to pay the
school tax for 4 children and they most certainly cannot pay it
themselves.
Slide 14
Are we getting this? If you receive the benefit; you pay for
it. The more you receive; the more you pay. Other benefits are
things such as Welfare, Social Security and Unemployment. How can
you expect to pay for those services? If you could, you probably
wouldnt need them!
Slide 15
Taxes There are three types of taxes collected that are based
on your earnings; your income. So, we have now moved away from
theories.
Slide 16
Proportional taxes You have defined this onelets see if it
makes sense. Let us say Person A earns $10,000. Person B earns
$1,000 dollars. Person C earns $100,000. According to this tax; all
would pay the same percent or proportion of their income in taxes.
Lets make it 2%; regardless of income. Each would pay $2 for every
100 dollars earned. No example available. We dont use this one.
Some refer to it as a flat tax.
Slide 17
NO example 30%
Slide 18
Progressive tax This one is based on ATP. (Ability-to-pay) I
make more than anyone in this room. Therefore, I pay more in taxes
than anyone here. Tax liability increases as income goes up Tax
liability decreases as income goes down (Tax liability means what
you pay in taxes)
Slide 19
How it works Lets make up an example: If you earn $61, 000 to
$90,000 annually you pay 10% of your income If you earn $31, 000 to
$60,000 annually you pay 7% of your income If you earn $11, 000 to
$30,000 annually you pay 5% of your income $61, 000 - $90,000 = 10%
$31, 000 - $60,000 = 7% $11, 000 - $30,000 = 5% INCOME CHANGES;
PERCENT CHANGES Example: Income tax
Slide 20
Regressive tax Regressive, in this case is backwards Lets make
up an example: If you earn $61, 000 to $90,000; pay 5% of your
income If you earn $31, 000 to $60,000; pay 7% of your income If
you earn $11, 000 to $30,000; pay 10% of your income $61, 000 -
$90,000 = 5% $31, 000 - $60,000 = 7% $11, 000 - $30,000 = 10%
INCOME CHANGES; PERCENT CHANGESbut in a backward sort of way.
Example: Sales tax
Slide 21
Questions? Comments? Hostile disagreements?
Slide 22
Lets see! Number from 1 7 in your notebook and lets have some
practice. The choices of answers are proportional, progressive, and
regressive. Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax Regressive = backwards, lower income; the higher the tax
bill and vice versa ex: sales tax
Slide 23
Practice tax quiz use your notes
Slide 24
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 1. a tax of $500 on all
persons
Slide 25
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 2. a tax of $8 on every $10
earned
Slide 26
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 3. sales tax on food
Slide 27
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 4.Income tax of 10% on
incomes less than $15,000 dollars 20% on income between $15,000 +
$30,000 and 30% on incomes over $30,000
Slide 28
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 5. 12% tax on all income
Slide 29
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 6. income tax in which higher
incomes are taxed at a higher rate than lower incomes
Slide 30
Proportional = the same for everyone; 1 % regardless
Progressive= higher income; higher tax bill and vice versa ex:
income tax. Regressive = backwards, lower income; the higher the
tax bill and vice versa ex: sales tax 7. tax in which the same
percentage of income is collected from all individuals
Slide 31
7. tax in which the same percentage of income is collected from
all individuals = same % for all; PROPORTIONAL 6. income tax in
which higher incomes are taxed at a higher rate than lower incomes
= % varies according to your income; ATPPROGRESSIVE 5. 12% tax on
all income = every one pays the same percent of INCOME.PROPORTIONAL
4. Income tax of 10% on incomes less than $15,000 dollars, 20% on
income between %15,000 + $30,000; and 30% on incomes over $30,000 =
%s vary; ATP; PROGRESSIVE 3.sales tax on food = all sales tax
areREGRESSIVE. WHAT IS A SALES TAX? A TAX ON PURCHASES 2. a tax of
$8 on every $10 earned = everyone is paying the same percent of
income no matter what PROPORTIONAL 1.a tax of $500 on all persons =
the percentage would vary depending upon incomeit would take a
larger percent of a poors mans income; therefore REGRESSIVE check
next 2 slides
Slide 32
HINTS: All sales tax are regressive. Lets go back to and for a
minute. Let us say that and both bought clothing because they want
to work on the car. They both spend the same amount on clothing and
the same amount in taxes. Lets say that ? paid $8 in tax. He had 56
dollars in his pocket. We will pretend the $56 is his income. He
just spent 1/7 of his income in taxes. 8/56. Does that make sense?
Lets say that ? paid the same $8 in tax. He had 16 dollars in his
pocket. We will pretend the $16 is his income. (8/16) He just spent
1/2 of his income in taxes. Relate tax to income
Slide 33
And furthermore If I paid 20 % of my income in taxes; that
would be proportional. If I paid $20 in taxes that would be
regressive. Think about it: You pay a poll tax of 100 dollars. You
only make a 100 dollars. You just paid 100 % of your income in
taxes. I have to pay the $100 poll tax also. I made $500. I paid
only 1/5 or 20% of my income in taxes The percent is not the same.
So, it is NOT proportional. And, it takes a larger
percent/proportion of a poor mans income. So, regressive it is!!!
DONE! Time for the real, graded quiz. Need sheet with heading,
number from 1-5.