Question

A​ "good" tax structure has five characteristics. a. Briefly discuss the five characteristics. b. Using the five​ characteristics, evaluate the following tax​ structures: 1. Federal income tax 2. State sales tax 3. Local ad valorem property tax

Answer 1

Explanation:

a. (i) A good tax scheme would ensure that wealth is distributed equally and reasonably in the society.

(ii) It should be written so that it provides the government with ample income.

(iii) There should be no unnecessary risk of collecting taxes.

(iv) In relation to the potential of donations, the cost of taxation should be allocated, i.e. it should be incremental in nature.

(v) Taxes should be collected at such a time or in the form that the taxpayer most effectively would afford it.

(vi) The tax regime ought to be very dynamic.

(vii) The time and sum to be paid to the government should be assured.

(viii) The taxation system should be relatively simple and easy to handle.

b.

1 .Federal Income Tax

There are seven tax rates in the federal individual income tax ranging from 10% to 37% . Taxable revenue–adjusted gross profit without the normal permissible exclusion or itemized expenses–applies to the income. Revenues under the usual (or comprehensive deductions) exclusion are therefore paid at zero levels.

2. State sales tax

US sales tax is the levy on the sale or leasing in the U.S. of goods and services. Sales tax is regulated at national level and there is no general national sales tax.

3. Local ad valorem property tax

Advertising property taxes are paid by the states, municipalities, the school districts and special tax authorities for real or personal property. Ad valorem applies, as a measure for sale price or interest, to a tax on goods or property.