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(Best solution) The correct option is a): Regressive taxes place a higher burden on people who earn less compared to wealthier taxpayers. This compensation may impact how and where listings appear. Paying taxes is inevitable. Regressive Tax - Understanding How a Regressive Tax System Works Often tossed around in debates about income tax, the phrase "flat tax" refers to a taxation system in which the government taxes all income at the same percentage regardless of earnings. b. 12 percent on income between $10,275 and $41,775: $3,780 ($41,775 - $10,275 = $31,500 x 12 percent) +. Sh are your journ ey. Suppose there is a poll tax of 3,000 (paid regardless of income) In this case, the person earning 10,000 is paying 30% of their income in tax 3,000. Incomestatementdata:AdvertisingexpenseCostofmerchandisesoldDeliveryexpenseDepreciationexpense-officebuildingsandequipmentDepreciationexpense-storebuildingsandequipmentDividendrevenueGainonsaleofinvestmentIncomefromLifecareCo.investmentIncometaxexpenseInterestexpenseInterestrevenueMiscellaneousadministrativeexpenseMiscellaneoussellingexpenseOfficerentexpenseOfficesalariesexpenseOfficesuppliesexpenseSalesSalescommissionsSalessalariesexpenseStoresuppliesexpense$125,0003,650,00029,00026,00095,0003,5752,22565,600128,50019,0001,8007,50013,75050,000165,00010,0005,145,000182,000365,00022,000, Retainedearningsandbalancesheetdata:Accountspayable$195,000Accountsreceivable543,000Accumulateddepreciationofficebuildingsandequipment1,580,000Accumulateddepreciation-storebuildingsandequipment4,126,000Allowancefordoubtfulaccounts8,150Available-for-saleinvestments(atcost)110,250Bondspayable,6%,due2022400,000Cash240,000Commonstock,$25par(400,000sharesauthorized;86,570sharesissued,82,670outstanding)2,164,250Dividends:Cashdividendsforcommonstock155,120Cashdividendsforpreferredstock85,000Stockdividendsforcommonstock62,800Goodwill510,000Incometaxpayable40,000Interestreceivable930InvestmentinLifecareCo.stock(equitymethod)689,100InvestmentinNordicWearInc.bonds(longterm)62,000Merchandiseinventory(December31,2012),atlowerofcost(FIFO)ormarket$780,000Officebuildingsandequipment4,320,000Paid-incapitalfromsaleoftreasurystock18,200Paid-incapitalinexcessofpar-commonstock842,000Paid-incapitalinexcessofpar-preferredstock150,000Preferred5%stock,$100par(30,000sharesauthorized;17,000sharesissued)1,700,000Premiumonbondspayable19,000Prepaidexpenses26,500Retainedearnings,January1,20128,708,150Storebuildingsandequipment12,560,000Treasurystock(3,900sharesofcommonstockatcostof$35pershare)136,500Unrealizedgain(loss)onavailable-for-saleinvestments(17,750)Valuationallowanceforavailable-for-saleinvestments(17,750)\begin{aligned} Proponents of proportional taxes believe they stimulate the economy by encouraging people to work more because there is no tax penalty for earning more. b. indirect tax. A flat tax system applies the same tax rate to every taxpayer regardless of their income bracket. A question has arisen as to whether a particular revenue should be identified on government-wide statements as a program revenue or a general revenue. Parul works for a state agency that conducts random checks of financial records and transactions after expenditures and reviews accounts of disbursing officers of all state funds to assure legal compliance. To give an idea, examples of regressive taxes are sales taxes and property taxes. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. You can learn more about the standards we follow in producing accurate, unbiased content in our. A regressive system differs from a progressive system, in which higher earners pay a higher percentage of income tax than lower earners. The term regressive tax means taxes that take a larger proportion of the income from lower earners than from higher earners. What is a progressive tax and give at least one example? Regressive vs. Proportional vs. Progressive Taxes: What - Investopedia The SEC generally oversees banking practices. f(t)=e0.14te0.11(15t), Paid to state and local governments on purchased goods and services, Paid to state or local governments based on the assessed value of property, Paid by businesses or individuals on money they make, The largest source of tax revenue for the federal government is, One in which the tax rate increases as the amount of taxable income increases. In computing earnings per share, assume that the average number of common shares outstanding was 84,000 and preferred dividends were $85,000. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Regressive and progressive taxes impact high- and low-income earners differently, whereas proportional taxes do not. Read our, Where You'll Pay the Most in State and Local Taxes. to keep the government running Employers who also pay state unemployment tax can get a federal tax credit of up to 5.4%, reducing the effective FUTA rate to 0.6%. AssetCostResidualValueServiceLife(Years)DepreciationMethodDepreciation(Year2)A?$20,0005DDB$24,000B$40,000?8SL4,500C65,0005,000? The fixed rate doesn't increase or decrease as income rises or falls. a. increasing taxes. As income increases, the proportion of your income paid in tax falls. In regressive taxes the government collects a higher level of taxes from the low-income earners and a comparatively lower level of taxes from the high-income earners. For each of the following depreciable assets, determine the missing amount (?). Conclusion. \text { Income from Lifecare Co. investment } & 65,600 \\ This taxpayer would owe a total of$6,308the 10% rate on the first $11,000 is $1,100, 12% on the $33,725 to $44,725 is $4,047, plus 22% of all earnings between $44,725 up to $50,000, which is $1,161. It is in opposition to a progressive tax, which takes a larger percentage from high-income earners. Instead, the percentage you owe increases as your income gets higher. No, government services could encourage growth but other practices could be more effective based on the economic situation. Governments apply sales tax uniformly to all consumers based on what they buy. As COVID-19 continues to affect lives and livelihoods around the world, we can already see that the pandemic and its economic fallout are having a regressive effect on gender equality.By our calculation, women's jobs are 1.8 times more vulnerable to this crisis than men's jobs. Required PDF Sample Exam Questions/Chapter 7 - Oakland University equal pay for owners and workers. Expert Answer. Many low-income Americans pay no federal income tax at all because of tax deductions. \text { Bonds payable, 6\%, due 2022 } & 400,000 \\ owned and managed by private corporations. Anexcise taxis a flat tax imposed on specific items such as fuel, tobacco, and alcohol. b. Which would be the best label for the circle in the center? ", The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. As vehicles become more energy efficient and less dependent on fossil fuels, fewer and fewer motor vehicle fuel purchases will be taxed. A tax that charges high-income earners a lower . Melissa Horton is a financial literacy professional. The Texas Department of Transportation (TDOT) reported that various alternative funding sources would be required to meet the expenses expected from 2020-2050. Who is responsible if your tax preparer makes a mistake on your tax return? \text { Treasury stock (3,900 shares of common stock at cost of } & \\ Which of These Best Describes Income Tax - Joseph-has-Leach Reducing deficit Which of the following best describes a regressive tax? A. A tax that Which detail is most likely to give consumers a false sense of security about using Edgozene? Sin taxes, a subset of excise taxes, are imposed on commodities or activities that are perceived to be unhealthy or have a negative effect on society, such as cigarettes, gambling, and alcohol. To fund government programs. Which best explains how contractionary policies can hamper economic growth? Less standard deduction: $12,950. \text { Common stock, \$25 par (400,000 shares authorized; } & \\ We also reference original research from other reputable publishers where appropriate. A common example of a local tax is a parking ticket? b. "Contribution and Benefit Base. Nine states use this income tax system as of 2022: Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah. Aflat taxis an alternative income tax that applies the same rate to every income level. A. Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia. Look at the chart comparing the price of graphic T-shirts to the quantity supplied. Check all that apply What was the change in the amount of intangibles from 2016 to 2017 for Coca-Cola and PepsiCo? It assists in anticipating profits. \quad\text { of cost (FIFO) or market } & \$780,000 \\ However, they do exist in every economy or nation. The number of data points that illustrate the proper allocation of resources is . \text { Interest receivable } & 930 \\ ", Tax Policy Center. AssetABCDECost?$40,00065,000230,000200,000ResidualValue$20,000?5,00010,00020,000ServiceLife(Years)58?108DepreciationMethodDDBSLSL? The bonds payable has a carrying value of $1,950,000 and conversion equity of$20,000. "Who Pays? Some of these include state sales taxes, user fees, and to some degree, property taxes. When a court evaluates a local ordinance and a potentially preemptive state statute, the canon would tilt the scale in favor of local control. It is in opposition with a progressive tax, which takes a . \text { Delivery expense } & 29,000 \\ What is the most important source of tax revenue in Texas at the state level? Pigouvian and sin taxes are specific types of regressive taxes. C. It does not affect total equity but transfers amounts between equity components. Prepare the adjusting entry to record the unrealized gain or loss on available-for-sale investments on December 31, 2016. \text { Preferred 5\% stock, \$100 par (30,000 shares authorized; } & \\ Once a worker earns more than that amount, they don't have to pay any more Social Security tax for the year. They're levied in an effort to deter individuals from purchasing these products. Which best describes a regressive tax? a tax that charges low-income Officials are currently working on the statement of activities within the government-wide financial statements. Worksheet Solutions Comparing Regressive, Progressive, and Proportional Taxes Theme 3: Fairness in Taxes Lesson 5: How Taxes Affect Us Key Terms progressive taxA tax that takes a larger percentage of income from high-income groups than from low-income groups. It was very expensive to keep factories running. Ineffective Economic Policies for a limited time US federal income tax is progressive by law, but which best explains why wealthy individuals can often pay far less in taxes than the top tax rate? OSHA The chart shows how two people with different incomes are taxed. When Katrine purchased cigarettes, a newspaper, and candy at the convenience store, she was charged an extra tax on the cigarettes. a. d. direct tax. A sales tax is a type of Examples of regressive taxes include sales taxes and property taxes, which are set at a flat percentage, regardless of who the purchaser or owner is. As with any government policy, progressive tax rates have critics. What best describes a regressive tax? a. proportional b. regressive c. inexpensive d. progressive e. unearned The government of Country C has passed a law protecting the physical safety of factory workers. Regressive taxes have a greater impact on lower-income individuals than on the wealthy. CHECK ALL THAT APPLY. (Round earnings per share to the nearest cent.) ", LibreTexts: Social Sciences. We find that the incidence (i.e., distributional impact) of such taxes depends upon the energy commodities . In this case, although the tax is the same rate in both cases, the person with the lower income pays a higher percentage of income, making the tax regressive. a. Deflation can result from rising demand and boosts the value of money. Which is true? \text { Prepaid expenses } & 26,500 \\ No other diet pill offers what our product does and, if you buy now, you can get two bottles of Edgozene for just $29.95! It encourages people to spread their resources around. \text { E } & 200,000 & 20,000 & 8 & \text { DDB } & ? When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. (Best solution) A regressive tax is a tax applied uniformly, taking a larger percentage of income from low-income earners than from high-income earners. a. Regressive taxes place a higher burden on people who earn less compared to wealthier taxpayers. Regressive taxessales taxes, property taxes, and sin taxesand proportional taxes have a greater impact on low earners because they spend more of their income on taxation than other taxpayers. Which organization is required by statute to prepare and present the state budget to the legislature? Study with Quizlet and memorize flashcards containing terms like Texans have indicated their preference for regressive taxes. Economist Friedrich Hayek argued that __________ can serve as signals in an economy. \text { Interest revenue } & 1,800 \\ A higher percentage and number of Texans lack health insurance than residents of any other state. Which best describes a regressive tax? \end{array} This compensation may impact how and where listings appear. The first individual earns $2,000 per week, making the sales tax rate on her purchase 0.35% of income. The decision to issue a stock dividend resides with shareholders. U.S. Alcohol Consumption on Low End of Recent Readings. First, the tax takes a larger percentage of income. Regressive tax - Wikipedia b. the amount of money invested in the property. What is the purpose of the Economic Stabilization Fund? She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. Most of the highest-earning fifth paid from 8% to 8.9%, and the highest-earning 1% paid only 7.4% of their income. A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. Limited access to education means that people are not trained to work in industry or technology. For example, imagine two individuals each purchase $100 of clothing per week, and they each pay $7 in tax on their retail purchases. and more. CHECK ALL THAT APPLY. \quad 17,000 \text { shares issued) } & 1,700,000 \\ A regressive tax is a taxapplied uniformly, takinga larger percentage of income from low-income earners than from middle- and high-income earners. jobs for women factory workers. Deflation can result from falling demand and reduces the value of money. A regressive tax system levies the same percentage on products or goods purchased regardless of the buyer's income and is thought to be disproportionately difficult on low earners. Most of the indirect taxes fall in the purview of . In the U.S. and certain other developed nations, a progressive tax is applied to income, but other taxes are levied uniformly, such as sales tax and user fees. What the difference between a tax deduction and a credit? b. reducing taxes. What were the amounts of accumulated amortization reported by Coca-Cola and PepsiCo at the end of 2016 and 2017? But if they earn $100,000 a year and pay the same $1,000 in sales taxes, this represents only 1% of their income. What type of tax is this? The only progressive consumption taxtaxes that increase based on incomeare those on luxury items, such as fine jewelry, yachts, and private jets. Its opposite, a progressive tax, imposes a larger burden on the wealthy. \end{aligned} So, a sin tax is considered to be the regressive tax. Investopedia does not include all offers available in the marketplace. The federal gas tax was 18.4 cents per gallon, while the average state tax was 30.63 cents per gallon, as of July 2021. \text { Office supplies expense } & 10,000 \\ A regressive tax is a type of tax that is assessed regardless of income, in which low- and high-income earners pay the same dollar amount. Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. Sam Miller earned $63,000 last year. \text { Cash } & 240,000 \\ Literally, "dominion of the city." for state courts faced with questions of implied preemption. The correct option is a): Regressive taxes place a higher burden on people who earn less compared to wealthier taxpayers. What is regressive tax? Definition and meaning User fees levied by the government are another form of regressive tax. A trade surplus is when a country imports more than it exports, while a trade deficit happens when exports exceed imports. e. Proportional, What gives the US government the power to collect taxes? A tax that charges high-income earners a lower percentage than low-income earners. Kalahira. Econ: Unit 8 Flashcards | Quizlet The most important regressive tax is the value added tax (VAT), in which a certain percentage of the price paid for a product is charged on top as a tax. Higher-income employees effectively pay a lower proportion of their overall pay into the Social Security system than lower-income employees because it's a flat rate for everyone and because of this cap. A regressive tax is what you call when the tax rate decreases as the amount that is to be taxed upon increases. ", Social Security Administration. A regressive tax is a tax that takes a larger percentage of income from low-income earners than from high-income earners. Texans have indicated their preference for regressive taxes. Use the companies' financial information to answer the following questions. Regressive tax indirect tax direct tax proportional tax. . Second, lower-income earners are more likely to smoke. \quad\text { Stock dividends for common stock } & 62,800 \\ A regressive tax is a tax applied in a way that the tax rate decreases with the increase of the taxpayer's income. Regressive. A trade surplus is when a country exports more than it imports, while a trade deficit happens when imports exceed exports. Where does Texas rank among the states in terms of residents with health insurance? For instance- A has income of $100 and B has income of. unit test Flashcards | Quizlet Expert answered|capslock|Points 18614| Log in for more information. the FDA An individual's earnings above this base are not subject to the 6.2% Social Security tax.