property tax

Examples of property tax in the following topics:

• Financing State and Local Government

  • Taxes are the primary source of revenue for state and local governments; income, property, and sales taxes are common examples of state and local taxes.
  • Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
  • Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property.
  • Property tax is generally imposed only on real estate, though some jurisdictions tax some forms of business property.
  • Property tax rules and rates vary widely.

• Corporate and Payroll Taxes

  • Many countries impose a corporate tax, also called corporation tax or company tax, on the income or capital of some types of legal entities.
  • The taxes may also be referred to as income tax or capital tax.
  • The effective tax rate is the average corporate tax rate on the company's income and this takes into consideration tax benefits included in a current tax year.
  • Corporations are also subject to a variety of other taxes including: property tax, payroll tax, excise tax, customs tax and value-added tax along with other common taxes, generally in the same manner as other taxpayers.
  • Deductions from an employee's wages are taxes that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG).

• How Taxes Work in the United States

  • Each has its own authority to tax.
  • Similarly, local governments can impose a variety of taxes, such as property taxes.
  • Federal taxes are created by the US Congress, which passes laws mandating what is taxed and the amount of the tax.
  • One of the most well-known taxes, the federal income tax, wasn't created until the passage of the 16th amendment in 1913 explicitly gave the US Congress the authority to tax income.
  • Disputes over tax rules are generally heard in the United States Tax Court before the tax is paid, or in a United States District Court or United States Court of Federal Claims after the tax is paid.

• Fiscal Policy -- Budget and Taxes

  • (Local governments, in contrast, generally collect most of their tax revenues from property taxes.
  • State governments traditionally have depended on sales and excise taxes, but state income taxes have grown more important since World War II. )
  • The 1862 tax law also established the Office of the Commissioner of Internal Revenue to collect taxes and enforce tax laws either by seizing the property and income of non-payers or through prosecution.
  • The Tax Reform Act of 1986, perhaps the most substantial reform of the U.S. tax system since the beginning of the income tax, reduced income tax rates while cutting back many popular income tax deductions (the home mortgage deduction and IRA deductions were preserved, however).
  • The Tax Reform Act replaced the previous law's 15 tax brackets, which had a top tax rate of 50 percent, with a system that had only two tax brackets -- 15 percent and 28 percent.

• Disposable Income

  • Income left after paying taxes is referred to as disposable income.
  • Disposable income is thus total personal income minus personal current taxes .
  • Amounts required to be deducted by law include federal, state, and local taxes, state unemployment and disability taxes, social security taxes, and other garnishments or levies, but does not include such deductions as voluntary retirement contributions and transportation deductions.
  • It is total personal income after subtracting taxes and typical expenses (such as rent or mortgage, utilities, insurance, medical fees, transportation, property maintenance, child support, food and sundries, etc.) needed to maintain a certain standard of living.
  • It is whatever income is left after taxes.

• Comparing Marginal and Average Tax Rates

  • An average tax rate is the ratio of the total amount of taxes paid, T, to the total tax base, P, (taxable income or spending), expressed as a percentage.
  • Broadly, the marginal tax rate equals the change in taxes, divided by the change in tax base, expressed as a percentage.
  • A progressive tax is a tax in which the tax rate increases as the taxable base amount increases .
  • A regressive tax is a tax imposed in such a manner that the average tax rate decreases as the amount subject to taxation increases .
  • A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases.

• Taxes

  • Examples of an indirect tax include sales tax and VAT (value added tax).
  • Progressive Tax: The more a person earns, the higher the tax rate.
  • Regressive Tax:In a regressive tax system, poorer families pay a higher tax rate.
  • Although a regressive tax system is never explicitly used, some claim a sales tax is a type of regressive tax.
  • Categorize types of taxes into ad valorem taxes and excise taxes

• Tax Incidence and Elasticity

  • Tax incidence refers to who ultimately pays the tax, the producer or consumer, and the resulting societal effect..
  • Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately has to pay, the tax.
  • The imposition of the tax causes the market price to increase from P without tax to P with tax and the quantity demanded to fall from Q without tax to Q with tax.
  • The producer is unable to pass the tax onto the consumer and the tax incidence falls on the producer.
  • In this example, the tax is collected from the producer and the producer bears the tax burden.

• Trading off Equity and Efficiency

  • Income taxes are a laddered progressive tax where income tax rates are set in income bands or ranges.
  • The purpose of a progressive tax system is to increase the tax burden to those most able to pay.
  • These individuals and groups support a flat tax or proportional tax instead.
  • Income tax is a progressive tax that assumes a regressive nature at the highest tax rate.
  • Explain tax equity in relation to the progressive, proportional, and regressive nature of taxes.

• What Taxes Do

  • Taxes are the primary source of revenue for most governments.
  • Taxes are most readily understood from the perspective of income taxes or sales tax, although there are many other types of taxes levied on both individuals and firms.
  • Congress enacts these tax laws, and the IRS enforces them.
  • Governments use different kinds of taxes and vary the tax rates.
  • As a result, individuals earning a relatively lower income will pay a higher proportion of income in the form of sales tax, defining the regressive nature of the tax.