POL 321 Lecture Notes - Lecture 9: Ad Valorem Tax, Capital Gains Tax, Income Tax

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Published on 28 Sep 2019
Lecture 9: Fiscal Policy
Fiscal Policy
Fiscal Policythe government's choices about how to collect revenue & how to allocate
resources; taxing & spending
At national level, legislature & executive branch are involved
Local levels also engage in fiscal policy
The Budget is the clearest showing of a government's priorities
4 ways to tax: income tax, ad valorem tax, consumption tax, user-fees
Ways To Tax
Income Taxbased on money that you earn during a set period of time
o Federal Income Taxa yearly tax, using brackets
o Payroll Taxtax both employees and employers pay towards Social Security &
Medicare; capped
Social Security is 6.25% on first $132,900, then 0% on rest
Social Securityincome safety net for elderly
Medicare is 1.45% on first $200k, then .9% on rest
o Capital Gains Taxtax on income earned on an investment
Can be short-term (held <1 year) or long-term (held >1 year)
Short-term has lower rate by income bracket & long-term has higher rate by
income (0, 15, or 20%)
If selling a house, don’t pay capital gains tax up to a certain amount at your
legal residence ($250k if single, $500k if married)
Ad Valorem Taxbased on the value of something you own
o Property Taxestax on property you own by Millage Ratethe amount per every
$1,000 of a property's assessed value
Local Property Tax = property value ÷ 1,000 * millage rate
o Estate or Inheritance Taxasset value at time of death
On amount >$11 million/person up to maximum of 40%
Consumption Taxbased on money you spend in the marketplace
o Sales Taxtax on bought goods
6% in FL + 1% in Miami-Dade
o Excise Taxtax on a specific item, like gasoline
User-Feesbased on your usage of a specific service
o Ex: national parks, street parking
Categorizing Taxes
Categorize taxes as: progressive, regressive, & flat/proportional
Progressive Taxtax is higher percentage for people who earn more
o Ex: Federal Income Tax
Regressive Taxtax is lower percentage for people who earn more
o Ex: Social Security Payroll Tax
Flat/Proportional Taxtax is the same for people regardless of income
o Gas tax
How to Tax
Government will always have to tax to provide any services
Question is how: who to tax & how much to tax them?
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