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Wi Sales Tax Exempt Form

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					TAXES: The main source of
     government revenue
  …nothing is certain, but death and
                               taxes.
                          B. Franklin
   Taxes Fund Public Goods and
            Services
                               Health Care for Elderly
National Defense

                                          Social Services




 State and
Local Police                       Public Education

               Financial Aid
  The Economics of Taxation
 In addition to creating revenue for the government,
  taxes also impact the economy in the following
  ways:
       Resource allocation - if taxes are too high, supply will
        decrease and /or prices will increase causing a shift in
        the allocation of land, labor and capital.
       Behavior adjustment - sin taxes, such as those placed
        on cigarettes attempt to change a person’s behavior
       Productivity and Growth - if taxes are too high, there is
        less incentive for people or businesses to continue to
        grow. Why earn more if most of it is taken away in
        higher taxes?
       Correct negative externalities
       Stabilize the economy through fiscal policy
To be effective Taxes must
meet the following criteria:


                        CRITERIA FOR TAXES


     EQUITY                     SIMPLICITY                           EFFICIENCY
 Is this tax fair?   Is this tax easy to understand?       Is this tax easy to administer?
                                                       Does this tax generate enough money?
TWO PRINICPLES of
   TAXATION
          “Who pays What” is
           based on two
           principles:
          Benefit Principle - The
           more you benefit from
           something, the more
           you should pay. Taxes
           on gasoline
          Ability to Pay - The
           more you make the
           more you should pay.
         Types of Taxes
 Taxes are classified according to the
  ay in which the tax burden changes as
  income changes.
 Proportional Tax
 Progressive Tax
 Regressive Tax
        Proportional Taxes
 Regardless of Income, the same tax rate is
  imposed upon everyone. Another term for a
  proportional tax is a flat tax.
 If there is a 20% flat tax, how much do you
  pay in taxes if you earn $10,000? What if
  you earn $100,000?
 Note as a person’s income increases, the
  percentage of total income paid in taxes
  remains the same.
 Property Tax is a proportional tax.
                 Proportional Tax

           40%



           20%
Tax Rate


           10%


                  10,000   50,000   100,000
                           Income
             Progressive Tax
 People with higher incomes pay a higher
  percentage in taxes. Federal and State income
  tax are progressive taxes.
 Simple “the more you make the more they take”

   INCOME        Amount Paid Amount Paid
                 in Taxes    as a
                             percentage
                             of Income
   $10,000       $1,000      10%
   $50,000       $ 10,000      20%
   $100,000      $ 30,000      30%
                 Progressive Tax

           40%



           20%
Tax Rate


           10%


                 10,000   50,000   100,000
                          Income
       Regressive Taxes
 The lower the income the higher
  percentage paid in taxes.
 Sales tax is an example of a regressive
  tax. Assume two families paid $1000 in
  sales tax by the end of the year.
  Which family spent a higher percent of
  their income on taxes?
  Income       Amount paid Amount paid in
               in taxes    taxes as a
                            percentage of
                            their income.
  $10,000      $1000.00     10%
  $50,000      $1000.00     5%
                 Regressive Tax

           40%



           20%
Tax Rate


           10%


                 10,000   50,000   100,000
                          Income
FEDERAL TAXES
   -Amendment 16 gives Congress
   the power to lay and collect taxes.
   Federal Income Taxes are due
   April 15.
   -The Internal Revenue Service
   (IRS) enforces/ collects from the
   tax code.
             Income Tax
 Individual income taxes are paid over time
  through a payroll withholding system (just
  look at your paycheck). By April 15, of
  every year you must file a tax return. Any
  difference in the amount paid compared to
  the amount owed is settled at this time.
 Two forms to know are your W4 and your
  W2. What are they?
                     W4
 Your withholding allowance
 Fill out a W4 every time you start a new job
 Increases or Decreases the amount of
  withholdings based on the number of
  dependents
 0=more withheld        2 =less withheld
 Your employer and you are putting away
  small portions of your paycheck, in order for
  you to pay your income tax at the end of the
  year.
   What does W4 look like?
 http://www.irs.gov/pub/irs-pdf/fw4.pdf
                        Sample W-2 Form
   Contains your tax information for one job in one year
   You’ll receive one for each job you worked at during the year
   Must be mailed by January 31 or every year.


           12-2222222                                 16,680.24       1,728.00

                                                      16,680.24       1034.16
           Real World Business
                                                      16,680.24       241.92
           Chicago, IL 60640

           000-00-000
                                                                  D      2000.00
           Irma Money
           2301 South Jackson
           Chicago, IL 60640


          IL   12-2222222        16,680.24   440.40
Payroll Taxes
     More Federal Taxes
 Corporate Income Tax - As a separate
  legal entity, corporations are taxed.
 Excise Tax - tax on the manufacture or
  sale of selected items
 Estate Tax - tax (18-50%) on the
  transfer of property upon a death. As of
  2006, estates worth less than 2 million
  dollars are exempt.
 Gift Tax - Tax on money donations, paid
  by the person donating.
 Customs Duties: Tax on imported
State Taxes and Local Taxes
 Intergovernmental      Intergovernmental
  Revenues - transfer     Revenues -from
  of money from the       state level
  federal government
                         Property Tax
 Sales Tax
 Employee               Public Utility or
  Retirement              State owned liquor
  Contributions           stores
 Individual Income      Sales Tax - this
  Tax                     varies from city to
                          city!
Where does our tax money
come from and then go?
Where do your Wisconsin tax
        dollars go?
 http://www.nationalpriorities.org/auxilia
  ry/taxday2008/243.pdf

				
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