ACC 442 Lecture Notes - Lecture 4: Proportional Tax, Regressive Tax, Flat Tax
Components of tax liability
tax rate x tax base
tax base
income, wages, value, or sales prices
Progressive tax rate
- the tax rate increases whenever the tax base increases
- ex) federal income tax
Proportional tax rate (or flat tax)
- the tax rate remains the same regardless of changes in tax base
- ex) sales taxes
Regressive tax rate
- the tax rate decreases as the tax base increases
- ex) FICA & FUTA
When does the amount of taxes due increase?
Whenever the tax base increases
What affects does the structure of tax rates have on the rate of increase?
It can create progressive, proportional, or regressive tax rates
Excise Taxes
- limited to specific goods or services
- liquor
- tobacco
- firearms
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Sales Taxes
- an example of a proportional tax
- levied on the retail sales of personal property
! - sales tax and used tax go hand-in-hand
Used taxes (together with sales tax)
- employed to prevent the ability of the purchaser to purchase goods from out-of-state with little to no
sales tax
- no sales tax but items brought in from other states will be taxed
Value Added Tax (VAT)
- a variation of sales tax
- levied at each stage of production by the producer
Which levels of government impose excise taxes?
All levels of government (federal, state, and local) impose excise taxes
Which levels of government impose sales taxes?
Only the state and local governments impose sales taxes
What are the two types of employment taxes?
- FICA
- FUTA
FICA is imposed on which group?
self-employed, employees, &individuals
FUTA is imposed on which group?
only employers
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Document Summary
Components of tax liability tax rate x tax base tax base income, wages, value, or sales prices. The tax rate increases whenever the tax base increases. The tax rate remains the same regardless of changes in tax base. The tax rate decreases as the tax base increases. It can create progressive, proportional, or regressive tax rates. Levied on the retail sales of personal property. Sales tax and used tax go hand-in-hand. Employed to prevent the ability of the purchaser to purchase goods from out-of-state with little to no sales tax. No sales tax but items brought in from other states will be taxed. Levied at each stage of production by the producer. All levels of government (federal, state, and local) impose excise taxes. Only the state and local governments impose sales taxes. Fica is imposed on which group? self-employed, employees, &individuals. Futa is imposed on which group? only employers. 6% on the first ,000 paid to each employee.
