Individual Income Tax

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a) State Income - regressive
b) Federal State Tax – Progressive (larger the state; larger the tax) c) Corporate & franchise tax - Progressive
d) Property tax – Proportional (value of property is taxed at flat rate) e) State Sales Tax – Proportional
Who uses
a) Property Tax – State Local
b) Excise Taxes – All three (State, federal, and local) c) Sales – State and Local
d) Income Tax – Federal, State, Local
e) Employment – Federal, State, and Sometimes Local
* Primary objective of federal income tax is to raise revenues for government operations. * secondary objectives of federal income tax include:
* to stimulate and encourage certain activities by providing tax credits or allowing a deduction to taxable income. These are activities such as: * Encourage research activities that will in turn strengthen the competitiveness of U.S companies (credit provided) * Encourage Venture Capital for small businesses (reduced tax rate) * Stimulate investment (tax deduction for small business equipment) * to encourage or discourage certain socially desirable or undesirable activities, such as: * charitable contributions (deductible)

* claiming of deduction for any activity contrary to public policy is prohibited. 17.
Taxpaying entities generally are required to pay income taxes on their taxable income. Flow-through entities, on the other hand, generally do not directly pay income taxes but merely pass the income on to a tax paying entity.Flow-through entity is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners (Taxpaying entities) and is not subject to a double taxation. 20.

“Double taxation” on C Corporations refers to the corporation paying income tax on its taxable income and then shareholders paying income tax on any dividends paid by the...