BU111 Lecture Notes - Lecture 4: Capital Gains Tax, Flat Tax, Distributive Justice
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Taxable entities: 4 major taxable categories: individuals. Methods of taxation: direct taxation: such as custom duties and sales type taxes which are usually calculated as a percentage of value of a good/service. Indirect taxation: such as income taxes, which are calculated on the income earned during a given period by a taxpayer. Progressive tax system: (basically the richer you are, the more tax you pay) Each bracket has its own tax rate, rates increase as income increases. Concept: higher-earning persons have ability to pay more (cid:862)ro(cid:271)i(cid:374) hood(cid:863) distri(cid:271)uti(cid:448)e justice (discriminatory/unequal) industry is created by the system itself; jobs for lawyers, accountants and governments dedicate departments for tax collection. Flat tax system: single tax rate applied to persons with minimal deductions, regardless of income level. Encourages initiative or taking economic risk as higher income is not penalized: discourages evasion (also) equal system:
