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Types of TaxesChapter 11
Federal Income TaxesSocial Security TaxesMedicare Taxes
State Income TaxesSales TaxExcise TaxProperty TaxesLocal Taxes
Federal, State & Local Taxes
Types of Taxes• Progressive Tax-
– As income ↑ => Average Tax Rate ↑– Example: U.S. Federal Income Tax
• Regressive Tax-– As income ↑ => Average Tax Rate ↓ – Example: Gasoline Tax, Bridge Tax
• Proportional Tax– Regardless of income level => Average Tax Rate unchanged– Example: Flat Income Tax, Corporate Taxes
• Excise Tax– Flat rate per unit => paid at purchase– Example: Gasoline ($0.50 per gallon), cigarettes (over $200 per pack)
• (both are also regressive taxes)
Some taxes can be two types!
Excise Taxes
Plus $1.01 per pack Federal Tax!
Tax Reading
2014 California State Income Tax
Tax Bracket (Single) Marginal Tax Rate
$0+ 1.00%
$7,582+ 2.00%
$17,976+ 4.00%
$28,371+ 6.00%
$39,384+ 8.00%
$49,774+ 9.30%
$254,250+ 10.30%
$305,100+ 11.30%
$508,500+ 12.30%
2013 - 2014
2013 Federal Tax Rate Brackets
Tax Rate Single Married filing Jointly or Qualifying Widow(er)
10% Up to $8,925 Up to $17,850
15% $8,926 – $36,250 $17,851 – $72,500
25% $36,251 – $87,850 $72,501 – $146,400
28% $87,851 – $183,250 $146,401 – $223,050
33% $183,251 – $398,350 $223,051 – $398,350
35% $398,351 – $400,000 $398,351 – $450,000
39.6% $400,001 + $450,001 +
Standard Deduction $6,100 $12,200
New top bracket
Bush Tax cuts are now permanent
http://www.paycheckcity.com/calculator/netpay/us/california/calculator.html
2 Wage Earners
John earns $500,000 Mary earns $60,000
Federal TaxesSocial Security MedicareCalifornia Tax
Yearly Bring Home PayMonthly Bring Home PayTotal Taxes Paid
Overall Tax % Rate
$151,026$7,254$9,995$52,830
$277,922$23,160$222,078
44.0%
$5,855$2,520$870$1,617
$49,137$4,094$10,863
18.0%
Who Pays Federal Income Taxes
• Top 1% of Taxpayers – Pay 38% of all taxes
– Earn 20% of all income
– 1.4 million households
– $343,000 + Up
• Top 10% of Taxpayers – Pay 70% of all income taxes
– Earn 46% of income
• Bottom 50% of Taxpayers – Pay 3% of Income Taxes
– Earn 13% of Income
– Below $33,000 ($16/hour working full time)
Death of Middle Class?
• http://www.pbs.org/newshour/bb/business/july-dec12/makingsense_10-16.html
Basic Income
• http://www.pbs.org/newshour/making-sense/why-americas-favorite-anarchist-thinks-most-american-workers-are-slaves/