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Public Policy and Taxation

Public Policy and Taxation

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Public Policy and Taxation

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  1. Public Policy and Taxation

  2. Where “IT” Comes From

  3. Taxes • Income Tax- Tax on a persons yearly income

  4. 2004 Tax Federal Income Tax Bracket

  5. Taxes Cont’d • Progressive Tax-- A tax that taxes higher incomes at a higher rate • Regressive Tax– Taxes lower incomes at a higher rate than higher incomes. • Proportional—Everyone pays the same proportion

  6. Progressive Tax

  7. Regressive Tax • EMS Tax---52.00---- • DISCLOSURE STATEMENT: You are entitled to receive a written explanation of your rights with regard to the audit, appeal, enforcement, refund and collection of local taxes by calling Capital Tax Collection Bureau’s Harrisburg Division at (717) 234-3217 during the hours of 8 a.m. – 4 p.m., Monday through Thursday and 8:30 a.m. – 4 p.m., Friday.

  8. Capital Gains– Profits made from the selling of real estate or other investments. • Deductions– expenses that may be subtracted from your taxable income. • Exemptions—A fixed amount that individuals are allowed to subtract for themselves and their dependents. • Credit--- Subtraction from your tax liability

  9. Other Taxes • Excise Tax----A tax levied on the manufacture, sale, or consumption of certain (particular) non-essential goods or services • Social Insurance—Social Security. • Estate Tax/Death Tax-- Up to 55% • Gift Tax– up to $11,000 per year tax free. Then up to 55%. • Customs Duties– Tax on imported goods.

  10. National Debt • Debt Clock

  11. $100

  12. $10,000

  13. $1 Million

  14. $100 Million

  15. $1 Billion

  16. $1 Trillion Right here is the man.

  17. Historic Debt

  18. Two philosophies on Fiscal Policy • Keynesian Economics– Influence the demand for goods and services by increasing government spending. • Supply-Side Economics– Influence the supply of goods through tax breaks to businesses and individuals as an incentive to work more, and invest more.

  19. Keynesian Philosophy • John Maynard Keynes • Used by FDR • New Deal

  20. Benefits • Gives immediate helping hand to those on the bottom socioeconomic rung. • Effects felt in a short period

  21. How it Works • Government initiates new spending that counts toward GDP. • MPC=.5 • New Spending = $1.00 • 2nd round =$0.50 • 3rd round =$0.25 • 4th round =$.125 • 5th round =$.0625 • 6th round =$.03125 • 7th round =$.02 • TOTAL $2.00

  22. Negatives • Inflation • Deficit Spending

  23. Supply-Side • Reaganomics/Voodoo Economics/Trickle Down • Use Tax breaks to encourage business growth and worker productivity.

  24. Benefits • No inflation

  25. How it Works • Tax Break to Producer • Tax Break = $1.00(this round of spending doesn’t count because nothing new is produced. • 2nd round =$0.50 • 3rd round =$0.25 • 4th round =$.125 • 5th round =$.0625 • 6th round =$.03125 • 7th round =$.02 • TOTAL $1.00

  26. Negatives • Takes longer for $ to trickle to the bottom rung

  27. Monetary Policy • Controls the flow of money in the economy to stabilize the value of the dollar.

  28. Monetary Policy Tools • Interest rates • Reserve Ratio • Buying and Selling Securities

  29. Interest Rate • Interest Rate– A fee paid for borrowing money or received for lending money. • Higher Interest rates _______ people to spend money and _______ people to save money. • Lower Interest Rates ________people to spend money ___________people to save money.

  30. What would the Fed Do? • If they wanted to expand the money supply. • If they wanted to contract the money supply.

  31. Required Reserve Ratio • Amount of $ a bank must hold in reserve. (based on a % of an account)

  32. How Do Banks Make Money?

  33. Example • Tim Burr deposits $200,000 in Anybank USA. • The Required Reserve Ratio is 10%. • How Much of Tim’s money must the bank hold in reserve? • What do they do with the rest?

  34. Mr. Yocum borrows $180,000 to buy my new car. I go to Hoffman Ford with my borrowed $180,000 and buy my new car.

  35. What happens next? • Hoffman Ford deposits his money in Anybank USA.$180,000 • How much of this money can they lend out?

  36. Do you mean there is more? Bob borrows $162,000 to buy his new estate.

  37. The bank has created more money in Supply. • Don’t believe me? • Take a look!!! • From the 200,000 deposit: • 180,000 Mr. Yocum spent on new car • 162,000 spent on their lovely estate. • Total $342,000 • An We could keep going

  38. Buying and selling securities • What is a savings bond?

  39. Series EE

  40. How does the Series EE Bond Work? • You Pay ½ of face value and wait for the maturation period.

  41. What are Treasury bills? • Treasury bills (or T-bills) are short-term securities that mature in one year or less from their issue date. You buy T-bills for a price less than their par (face) value, and when they mature we pay you their par value. Your interest is the difference between the purchase price of the security and what we pay you at maturity (or what you get if you sell the bill before it matures). For example, if you bought a $10,000 26-week Treasury bill for $9,750 and held it until maturity, your interest would be $250.

  42. What are Treasury notes and bonds*? • Treasury notes and bonds* are securities that pay a fixed rate of interest every six months until your security matures, which is when we pay you their par value. The only difference between them is their length until maturity. Treasury notes mature in more than a year, but not more than 10 years from their issue date. Bonds*, on the other hand, mature in more than 10 years from their issue date. You usually can buy notes and bonds* for a price close to their par value.

  43. How do bonds control the money supply? • Watch and learn Grasshopper!

  44. Business Regulation • Trusts—business combination formed to limit competition and fix prices. • Standard oil • Regulation of public utilities • Food Production regulation • Regulations on advertising • Cigarette advertising on radio and TV was banned • Consumer Product safety commission

  45. Labor laws • Restrictions on juvenile labor

  46. Workplace safety • OSHA • Worker’s Compensation

  47. Unemployment compensation • $comes from a tax on employers which buys a form of insurance.

  48. Agriculture Policy • Land-Grant Colleges—Grants funds from public lands to schools for the teaching of agriculture, veterinary medicine etc…