How much do you pay Uncle Sam each year?
How much do you pay Uncle Sam each year? Before you go on to complete the Assignment, consider taking some time to complete the optional Personal Taxation exercise below, where you will calculate your annual tax obligation to the federal government. Going through this process will help you tie together some of the key concepts we’ve considered throughout the course. Remember, you do not have to share your personal information or findings with your peers or instructor.
Use this Personal Taxation Template Download Personal Taxation Template[PDF] to complete the exercise.
In your own words, address the following requirements.
Be sure to exceed a minimum of 100 words for each requirement to ensure thorough depth and detail is utilized in demonstrating your understanding of the answer.
There are several Tax Credits and Deductions that reduce Tax Liability (the amount of tax you owe the government), including the Earned Income Tax Credit meant to assist those with lower earned incomes; credits for Health Care (Net Premium Tax Credit), and Education Credits such as the American Opportunity Credit or Lifetime Learning Credit to make health care and education more affordable. If you own a home, you may have also been able to deduct your Mortgage Interest from your taxable income, lowering your tax liability.
Businesses also benefit from various tax credits and deductions. One is the depreciation deduction. For example, if ABC Construction buys a Caterpillar D10 bulldozer for $1,000,000, making it a depreciable asset, the IRS will allow ABC, Inc. to depreciate its value for 5 years. ABC, Inc. can deduct $200,000 annually from its taxable income for five years, effectively paying no income tax on $1,000,000 in income over five years. If ABC’s average tax rate is 30%, it saves $300,000 in taxes over five years!
Remember the Law of Demand and the relationship between Price and Demand. Consider how this tax deduction affects the cost and thus the demand for depreciable assets and how this affects the economy.
Think about why the government allows these credits and deductions considering the Law of Demand.
What are Federal income and Corporate income tax revenues used for by the government?
Explain why the government seems to support lowering individual income taxes instead of maximizing its tax revenue.
With the Law of Demand in mind, explain how deducting home mortgage interest from taxable income benefits the homeowner and discuss why the government allows this benefit even though it means less tax revenue for the government. Discuss which component of the GDP equation these tax benefits affect and how.
With the Law of Demand and Capital Deepening in mind, explain how a tax credit for education (which, again, reduces government tax revenue) helps the economy. Discuss which component of the GDP equation these tax benefits affect and how.
Using the business depreciation example above, explain how, even though the government loses roughly $300,000 in corporate income tax from ABC, Inc., this benefits the economy.
Submit
Submit a Word Document containing your assignment and the following requirements:
100 words per requirement / 500 words total
APA Requirements
1” inch margins
Times New Roman 12 pt font
Double-Spaced
In-text Citations
Title Page
Reference Page and in-text citations
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
