how can the u.s. significantly decrease the deficit 1) 2) 3) 4) taxes spending
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3 Types of Taxes
• Progressive-– Tax rate increase as income increases– Example: Income Taxes
• Regressive-– Consumes larger % of lower income worker’s salary– Example: Gasoline Tax, Bridge Tax
• Flat– Same % for everyone– Example: Sales Tax, Some State income taxes
Federal Income Tax
• Progressive Income Tax
As income % Tax Bracket
Tax Rate
SingleMarried Filing
Jointly
10% $0 – $8,350 $0 – $16,700
15% $8,351– $33,950 $16,701 – $67,900
25% $33,951 – $82,250 $67,901 – $137,050
28% $82,251 – $171,550 $137,051 – $208,850
33% $171,551 – $372,950 $208,851 – $372,950
35% $372,951+ $372,951+
EVERY taxpayer pays10% on first $8,350 of income
Example: If you Earn $100,00 (single)($ 8,350 - 0 ) x .10 : $ 835(33,950 - 8,351) x .15 : 3,840(82,250 - 33,951) x .25 : 12,075(100,000 - 82,251 ) x .28 : 4,970 Total: $ 21,720 or 21.7%
http://www.paycheckcity.com/calculator/netpay/us/california/calculator.html
2 Wage Earners
John earns $360,000 Mary earns $60,000
Federal TaxesSocial Security MedicareCalifornia Tax
Take Home PayPay Per MonthTotal Taxes Paid
Overall Tax % Rate
$91,025$4,485$5,220$32,123
$226,965$18,913$133,035
37.0%
$5,855$2,520$870$1,617
$49,137$4,094$10,863
18.0%
Numbers to Know for Exam
• Top 1% of Taxpayers ($343,000 + Up)
– Pay 38% of all taxes
– Earn 20% of all income (1.4 million households)
• Top 10% of Taxpayers ($115,000 + Up)
– Pay 70% of all income taxes
– Earn 46% of income
• Bottom 50% of Taxpayers ($33,000 + Below)
– Pay 3% of Income Taxes
– Earn 13% of Income
Equal % Tax Cuts
• Example: 10% tax cut for ALL taxpayers
• Who gets more nominal dollars (money)
Earn $120,000 Taxes $36,000 Refund $3,600
Earn $24,000 Taxes $3,000 Refund $300
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