2. Taxes
Taxes in the past:
Ancient Mesopotamia – livestock and labor
Ancient Egypt – taxes, tax collectors, tax shelters
Bible – taxes and tax collectors
taxes appear in scriptures as a necessity, tax collectors as sinners
1927 – “Taxes are what we pay for civilized society” O. W. Holmes
Goals of taxation:
Raising money for government services
promoting the well-being of society (defined by the government in power)
public safety
national defense
education
protecting the environment
implementing fiscal and monetary policies, pushing economical growth
redistribution of wealth
Types of taxes:
Income tax system – taxes high income earners at a higher rate than low income earners
Government subsidies and vouchers – food stamps, housing programs
Luxury tax – additional tax bill on expensive items not considered essential, e.g. jet planes, diamond rings, expensive clothes
Sin tax – on not-good-for-you products like cigarettes, drugs, and alcohol, meant to reduce consumption
Gasoline tax – meant to encourage people to drive less
Soda tax – getting people to drink fewer sugary drinks (France)
Fat tax – on food that were relatively high in saturated fat (Denmark passed, then got rid of)
Carbon tax – based on greenhouse gas emissions generated from burning fuels in businesses or households (British Columbia, Ireland, Chile)
Direct taxes – paid directly by a person or organization to the government body that imposed the taxes.
property taxes
income taxes
Indirect taxes – collected by a store, seller, or producer of goods, paid by consumers.
Value Added Taxes
sales taxes
Inefficiency – the Voldemort of economic outcomes
Characterization of taxes:
regressive – same for everyone, hit lower-income individuals harder = not fair, value judgment
progressive – bigger income, bigger taxes (income tax in the US)
proportional – require the same percentage of income for all, regardless of how much they make
flat tax – system with constant marginal rate
with 10% tax → earn $200,000, send $20,000 ; earn $20,000, send $2,000
ryczałt – lump sum tax
How progressive income tax works:
The IRS calculates how much you owe in taxes, uses MARGINAL INCOME TAX BRACKETS – based on the amount of TAXABLE INCOME EARNED in a year. These marginal tax rates present the HIGHEST POSSIBLE INCOME TAX RATE you could pay.
Income gets divided in chunks that correspond to 7 different tax rates.
Earn $37,450 – 15% tax, but you pay
10% tax – the first $9,225
Earn $37,550 – 25% tax, but pay 25% only on these extra $100
Treasury – deal with all of the money → tax office → IRS
first tax office, second tax office, third tax office
Taxible:
food
Non-taxible:
air
email
Deductible (wliczony w koszty) – Non-deductible
taxable
Tax-free → non-taxable
Tax-exempt → status given to people who do not pay taxes temporarily
Voluntary taxation movement – you get a card for paying taxes, you only get public benefits if you pay 🙂
The Laffer Curve – maximum amount of tax you can take before you start to destroy economy
Where does the money from taxes go?
The government invests, then spends it. They must provide collateral – pension money (future retirements), national assets (coal, access to water)
PAYE - Pay As You Earn → tax automatically deducted from salary
tax bracket / band - category of how much you pay in taxes based on your income
tax rate - percentage of the money you pay in each bracket
tax threshold - the amount of money that needs to be earned in order to pass into the next tax bracket
personal allowance (kwota wolna od podatku) – 30,000 pln per year – you don’t pay a tax for that
National Insurance – ZUS, Social Security, NI
Why do we pay it?
For pensions. That money is supposed to be away from the government - protected from anyone using that.
gross pay – brutto
net pay – after taxes
take-home pay – after tax and additional expenses, e.g. insurance at work
zwrot podatkowy – tax rebate
tax return – PIT