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Strategies for U.S. Deficit Reduction: Taxation and Spending Reforms

Explore how the U.S. can decrease the deficit through tax reforms and spending adjustments, including an overview of the U.S. Federal Income Tax System and different tax types. Learn about the goals of an income tax, tax brackets, and strategies for economic growth, such as equal percentage tax cuts. Delve into the impact of fiscal policies and the implications of the Bush Tax cuts. Gain insights into the distribution of tax burdens across various income levels. Discover key numbers and facts essential for understanding the U.S. tax system and deficit challenges.

wayne-kirk
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Strategies for U.S. Deficit Reduction: Taxation and Spending Reforms

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  1. How can the U.S. significantly decrease the deficit 1) 2) 3) 4) Taxes Spending

  2. Tax Rate Introduction U.S. Federal Income Tax System

  3. 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

  4. Purpose/Goals of an INCOME TAX

  5. Tax Worksheet • History of Income Taxes • Taxes people pay

  6. EVERY taxpayer pays 10% on first $8,350 of income Federal Income Tax • Progressive Income Tax As income% Tax Bracket 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%

  7. 2 Wage Earners Mary earns $60,000 John earns $360,000 $5,855 $2,520 $870 $1,617 $49,137 $4,094 $10,863 18.0% Federal Taxes Social Security Medicare California Tax Take Home Pay Pay Per Month Total Taxes Paid Overall Tax % Rate $91,025 $4,485 $5,220 $32,123 $226,965 $18,913 $133,035 37.0% http://www.paycheckcity.com/calculator/netpay/us/california/calculator.html

  8. 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

  9. Top 1% pay more taxes but The income Gap has widened last 30-Years

  10. EQUAL % tax cuts What best stimulates economic growth?

  11. Equal % Tax Cuts • Example: 10% tax cut for ALL taxpayers • Who gets more nominal dollars (money) • Earn $120,000 Taxes $36,000Refund $3,600 • Earn $24,000 Taxes $3,000Refund $300

  12. Fiscal Cliff December 2012

  13. Bush Tax cuts are now permanent New top bracket

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