Tax Effect


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A basic description on how taxes work and their effect.

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Tax Effect

  1. 2. Notable Quotes <ul><li>“ In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin </li></ul><ul><li>“ Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Ronald Reagan </li></ul><ul><li>“ The hardest thing to understand in the world is the income tax.” Albert Einstein </li></ul><ul><li>“ There is no such thing as a good tax.” Winston Churchill </li></ul><ul><li>“ You don't pay taxes - they take taxes.” Chris Rock </li></ul>
  2. 3. The Income Tax was created by the 16 th Amendment to the Constitution in 1913 for the purpose of raising $$$ for the government. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
  3. 4. Types of Taxes Federal Income Tax State Income Tax Medicare Social Security Sales Tax Property Tax Estate Tax Gift Tax Customs and Duties Tax Excise Tax Vehicle Taxes User Fees
  4. 5. Burden Why should I care?
  5. 6. What Taxes Do <ul><li>Pays for National Defense </li></ul><ul><li>Pays for Infrastructure – roads, bridges and public works </li></ul><ul><li>Pays for Social Programs – Social Security, Medicare, & underprivileged programs </li></ul><ul><li>The operation of government </li></ul>
  6. 8. The Tax Effect Increased costs to the consumer
  7. 9. Economic Base Taxes
  8. 10. Economic Base New Taxes
  9. 11. Economic Base New Taxes Reduced Disposable $$$
  10. 12. Economic Base New Taxes Reduced Disposable $$$
  11. 13. What are our tax rates?
  12. 14. Work-for-All had the following illustration combining the Armey Curve with the Laffer Curve. It indicates that if a country wants to maximize the growth of wealth, the optimum tax rate is 30%; if the country wants to maximize revenue, the optimum tax rate is 45%.
  13. 15. Tax Rates Over Time
  14. 16. Changing Spending Pattern
  15. 17. Less is More <ul><li>Lowering taxes has worked four times in modern U.S. history </li></ul><ul><li>Reducing the tax rate produces more cash flow to the Treasury. </li></ul><ul><li>Presidents Coolidge, Kennedy, Reagan, and Bush (43) </li></ul>
  16. 21. What is a fair tax rate???
  17. 23. Who Doesn’t Pay Taxes? A Lot of People
  18. 25. How Has Our Spending Changed?
  19. 26. In short, reductions in top tax rates under Presidents Kennedy and Reagan, and reductions in capital gains tax rates under Presidents Clinton and George W. Bush, not only &quot;paid for themselves&quot; but also provided enough extra revenue to finance negative income taxes for the bottom 40% and record-low income taxes at middle incomes.
  20. 28. <ul><li>The current Income Tax is a graduated tax. </li></ul><ul><li>Flat Tax – Not graduated, everyone pays the same rate. Studies seem to focus on 17% as being revenue neutral. </li></ul><ul><li>Fair Tax – Based on purchases. AKA as a national sales tax, VAT or Consumption Tax. 16 th Amendment should be repealed for this to be effective. </li></ul>Alternatives to Income Tax
  21. 29. States With No Income Tax <ul><li>Alaska </li></ul><ul><li>Florida </li></ul><ul><li>Texas </li></ul><ul><li>Nevada </li></ul><ul><li>New Hampshire </li></ul><ul><li>South Dakota </li></ul><ul><li>Tennessee </li></ul><ul><li>Washington </li></ul><ul><li>Wyoming </li></ul>
  22. 30. <ul><li>Americans spend 7.6 billion hours each year doing their taxes </li></ul><ul><li>We spend $27.7 billion a year preparing taxes </li></ul><ul><li>America has 98,000 troops in Iraq... and 101,054 employees at the IRS. </li></ul><ul><li>The number of pages in the tax code has increased 16,775% in the past century </li></ul><ul><li>New York City has the highest corporate income tax in the world </li></ul><ul><li>CORPORATE TAX EVASION: GE made $10.3 billion in pre-tax income in 2008, but didn't have to pay a single cent in taxes </li></ul><ul><li>BUSTED: In 2009, Treasury Secretary Timothy Geithner stumbled through his confirmation after it was revealed he failed to pay taxes of $42,000 on IMF income. </li></ul><ul><li> Dividend stock investors get taxed twice... first the company pays taxes on earnings, then you pay taxes on dividends. </li></ul>Tax Facts That Will Make Your Head Explode Reference: #
  23. 31. Conclusion – Reducing the amount of taxes can increase the cash flow to the treasury. Balancing the expenditures to match the cash inflow makes a healthier economy.
  24. 32. <ul><li>Think about this next time you complain about paying taxes … how much is enough? </li></ul><ul><li>Do you know how much you pay? </li></ul><ul><li>Did you know that 86% of all taxes are paid by the top 25% income earners. </li></ul><ul><li>The top 50% pay 96.70% of all taxes. </li></ul><ul><li>The top 1% pay more than a third of all taxes: 36.89%. </li></ul><ul><li>In 1980, when the top income tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with the top rate of 35%, they pay more than double that share. </li></ul><ul><li>47% of Americans pay No tax at all. [Source: IRS 2009] </li></ul>
  25. 33. “ I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”  -- Winston Churchill &quot;You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage by taking away people's initiative and independence. You cannot help people permanently by doing for them, what they could and should do for themselves.“ --Abraham Lincoln