...the compensated elasticity of supply of savings, Answer Question 3 If the return to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s marginal rate of time preference will equal: Answer Question 4 The Haig-Simons definition of income: Answer Question 5 Comprehensive income: Answer Question 6 Which of the following is the result of The Economic Growth and Tax Relief Reconciliation Act enacted in 2001? Answer Question 7 The reduction in marginal tax rates will: Answer Question 8 Which of the following is true for the federal income tax in the United States? Answer Question 9 The excess burden of tax preferences: Answer Question 10 Tax expenditures are: Answer Question 11 Accelerated depreciation allows corporations to: Answer Question 12 In the long run a corporate income tax that initially reduces the return to investment in the corpo¬rate sector will also: Answer Question 13 If corporations maximize profits, the short-run incidence of a tax on its profits will be borne by: Answer Question 14 If an all-equity firm has after-tax income of $100,000 based on a 34% income tax, what is the after-tax income of an equivalent firm that pays $15,000 in interest that is tax deductible? Answer Question 15 If the supply of savings is not perfectly elastic, the corporate income tax is likely to: Answer Question 16 Assuming that a person never receives any cash gifts or bequests, a tax on comprehensive con¬sumption is equivalent...
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...Professor Emanovsky Econ 2015 Should Tax Laws be Reformed to Encourage Savings? What defines a nation’s way of life and standard for living depends entirely on its ability to function economically. In addition, the rate at which a country saves is the key to determining its prosperity from a long term perspective. More businesses with more facilities and more equipment equal a greater degree of productivity and greater income for employees. This formula transfers to show greater income for consumers and proves clear relationships between national saving rates and terms in which we measure economic well-being. In addition to the large scale national example, there is also an obvious connection between increased savings and families who are able to overcome financial obstacles and decrease overhead. For the average consumer, financial security means little to no debt, increased credit, increased education, home ownership and retirement options. In a perfect world, people would benefit directly and completely from their hard work and efforts to better themselves and their lifestyles. Nearly every American, and non-American for that matter, believes that if they work hard enough and save enough money, they will have opportunities to move upwards on the social economic ladder. The potential for a better future is the primary reason for most Americans to even attempt to save money in the first place. Unfortunately, current policies that support the achievement of such goals are...
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...Chapter 3 Tax Planning Strategies and Related Limitations SOLUTIONS MANUAL Problems [LO2, LO3 PLANNING] Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 40 percent this year and next year, and that she can earn an after-tax rate of return of 12 percent on her investments. When should she pay the $20,000 bill—this year or next? Option 1: Pay $20,000 bill in December: $20,000 tax deduction x 40 percent marginal tax rate = $8,000 in present value tax savings. After-tax cost = Pretax Cost – Present Value Tax Savings = $20,000 – $8,000 = $12,000 Option 2: Pay $20,000 bill in January: $20,000 tax deduction x 40 percent marginal tax rate = $8,000 in tax savings in one year. Present Value of Tax Savings = $8,000 x .893 (Discount Factor, 1 Year, 12 percent) = $7,144 After-tax cost = Pretax Cost – Present Value Tax Savings = $20,000 – $7,144 = $12,856 Paying the $20,000 in December is the clear winner. [LO2, LO3 PLANNING] Using the facts from the previous problem, how would your answer change if Isabel’s after-tax rate of return were 8 percent? Option 1: Pay $20,000 bill in December: $20,000 tax deduction x 40 percent marginal tax rate = $8,000...
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...Table of Contents Introduction 2 1.1 Describe the UK tax environment to Shawn 3 1.2 Analyse the role and responsibilities of you as the tax practitioner in the contexts of UK tax system. 7 1.3 Explain the tax obligations of tax payers or their agents and the implications of non-compliance 9 2.1 Calculate relevant income, expense and allowances 10 2.2 Calculate taxable amounts and tax payable, for employed and self-employed individuals, and advise on payment dates 11 2.3. Complete relevant documentation and returns 12 Conclusion 13 Reference 14 Introduction UK tax environment are many problems for a British citizen who has plans to start a new business in the UK. Being a new businessman and had no direct background about the UK tax systems rules and procedures, Based on the information in the scenario, we research in the UK tax environment according to the factors following: the environment, the role and the responsibility of the UK tax practitioners, tax system, explain the tax obligations of tax payers or their agents and the implications of non- compliance, Calculate the relevant income, expenses and allowances, Calculate taxable amounts and tax payable, for employed and self-employed individuals, and advise on payment dates for the above cases, complete the relevant documentation and tax returns. 1.1 Describe the UK tax environment to Shawn 1.1.1 UK tax legislation: The tax which is regulation set to apply for citizen in UK with the...
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...A new Tax Planning & Practice Guide—Tax Saving Moves for the Rest of 2013—is now available on Checkpoint. (Tax Planning & Practice Guide ¶ 101 10/15/2013) It is designed to facilitate year-end tax planning in a challenging environment that includes higher top income tax rates for ordinary income, capital gains and dividends; uncertainty surrounding the extension of dozens of expiring individual and business tax provisions at year's end; and the imposition of two new taxes on higher-income individuals—a 0.9% payroll tax on wages and self-employment income and a complicated 3.8% surtax on net investment income. It describes the moves to make by year-end to achieve maximum overall tax savings for 2013 and later tax years and explains how to set basic planning goals and adjust income and expenses accordingly. Opportunities and challenges. Taxpayers and their advisers engaged in year-end tax planning for 2013 once again are challenged by a complex legislative environment. While the American Taxpayer Relief Act of 2012 (2012 TRA, P.L. 112-240), enacted in the first days of 2013, brought a measure of certainty to the tax landscape, it came at the cost of higher top income tax rates for ordinary income, capital gains and dividends, along with limits on the availability of the personal exemption and itemized deductions. The 2012 TRA preserved many of the favorable tax breaks that were scheduled to expire with the sunset of the Economic Growth and Tax Relief Reconciliation Act...
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...the 1990s: assuring upward mobility for working Americans in the new world economy; resolving the great American dilemma of race; restoring a civil society and strengthening the social ties that foster a sense of community; finding America’s proper role in the post-Cold War world; and rethinking the size, shape, and mission of government in an Information Age. The Foundation explores public controversies over cultural questions—race, ethnicity, gender, religion, morality, and civic education—that are often ignored in conventional political discourse. The Foundation’s Project on Tax Reform and Economic Growth works to develop a tax reform program that is consistent with a progressive distribution of the tax burden, and can help promote stronger job and business formation, greater productivity, and higher family incomes. This report is the first of two new reports outlining the essential features of such a tax reform program. The preface contains more information about the four previous reports produced by this project. To order previous reports or additional copies of this report, please call the Foundation at (202) 546-4482. They are also available on the World Wide Web at http:/ /www.dlcppi.org/economic.htm. The Foundation is a nonpartisan research and educational foundation associated with the Democratic Leadership Council and the...
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...Taxation System Work? • The Income Tax System in Canada • Types of Income • Calculating Income Tax Payable • Taxation of Investment Income • Tax-Deductible Items Related to Investment Income How are Investment Gains and Losses Calculated? • Disposition of Shares • Disposition of Debt Securities • Capital Losses • Tax Loss Selling What are Tax Deferral Plans? • Registered Pension Plans (RPPs) • Registered Retirement Savings Plans (RRSPs) • Registered Retirement Income Funds (RRIFs) • Deferred Annuities • Tax-Free Savings Accounts (TFSA) • Registered Education Savings Plans (RESPs) • Pooled Registered Pension Plans (PRPPs) What are Tax Planning Strategies? Summary 25•2 © CSI GLOBAL EDUCATION INC. (2013) LEARNING OBJECTIVES By the end of this chapter, you should be able to: 1. Describe the features of the Canadian income tax system, calculate income tax payable, and differentiate the tax treatment of interest, dividends and capital gains (and losses). 2. Calculate capital gains and capital losses and assess strategies for minimizing tax liability. 3. Describe and differentiate the different tax deferral plans and their uses. 4. Identify basic tax planning strategies and discuss their advantages. TAXES AND INVESTMENTS It is often said that there are only two certainties in life: death and taxes. Taxes are a reality of life for Canadians and they affect many personal and investment decisions. Complicating matters is the differential tax rates for income, dividends, and capital...
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...1.1.1: Low risk ............................................................................................................................ 4 1.1.2: Mid risk ............................................................................................................................. 5 1.1.3: High risk ........................................................................................................................... 5 1.2 Evaluate a range of investments available from banks, building societies, insurance companies and national savings. ..................................................................................................... 7 1.2.1: Bank .................................................................................................................................. 7 1.2.1: Building society ................................................................................................................ 8 1.2.3: National savings. ............................................................................................................... 9 1.2.4: Insurance company ......................................................................................................... 11 1.3 Analyze the suitability of these products for different...
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...Income Tax Law Income Tax Law and the National Budget 2010-2011 Md. Abdur Rashid, FCMA B.Com. (Hons.), M.Com., DAIBB, LLB, FCMA Income Tax Law explain changes in tax struc-ure of an economy over time under t the impact of economic development and of political and social factors. Tax structure is affected by economic development in three ways: (a) tax base undergoes a change as the develop- ental process m proceeds; (b) change in the tax base brings about changes in the revenue system: and (c) economic development leads to changes in the objectives of tax policy. Bangladesh Government collects taxes on account of custom duty, sales tax, value added taxes, excise duty, cess, fees, fines, penalties, income tax, advalorem duty, etc. It appears that to fulfill the objectives of tax policy the Government every year brings some changes in various tax laws to collect more taxes on the basis of above tax structure. be established for those items to repair or servicing and thus to reduce the unemployment problems in the country. National Budget Every year before preparing National Budget the National Board of Revenue holds series of meetings with various trade bodies, trade associations, groups of people, various academic and professional Institutions. It seems that this year the discussions have been held on various scopes and opportunities of collecting more taxes. The discussions, of course, have been held in various dimensional scopes. In such a meeting organized by Management...
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...federal income tax rates are as follows: 15% on the first $43,953 of taxable income, + 22% on the next $43,954 of taxable income (on the portion of taxable income over $43,953 up to $87,907), + 26% on the next $48,363 of taxable income (on the portion of taxable income over $87,907 up to $136,270), + 29% of taxable income over $136,270. There are provincial and territorial income taxes which are comparable to our state income taxes. There are really too many to list them all but they range from between around 5% to 21%, based on income margins. Capital gains income is subject to taxation of 50%, the other half is not taxed. Settlements and legal damages are generally not taxable, even in circumstances where damages (other than unpaid wages) arise as a result of breach of contract in an employment relationship. Personal income tax can be deferred in a Registered Retirement Savings Plan (RRSP) and tax sheltered savings accounts (which may include mutual funds and other financial instruments) that are intended to help individuals save for their retirement. Payroll tax is 4.95% which goes to CPP (Canada Pension Plan). It is a contributory, earnings-related social insurance program. The CPP program mandates all employed Canadians who are 18 years of age and over to contribute a prescribed portion of their earnings income to a nationally administered pension plan. And then an additional 1.78% goes to Employment Insurance. There are some of the same types of income that are...
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...TOPIC 7 – FINANCIAL MARKETS Eco 304L Fall 2014 Topic 6 – Financial Markets The Financial System -‐ How Businesses Finance Themselves Saving and Investment (National Income Accounting Redux) Ricardian Equivalence and Temporary vs. Permanent Taxt Cuts The Market For Loanable Funds – Modeling Financial Markets 1 Topic 6 – Financial Markets The Financial System -‐ How Businesses Finance Themselves The Financial System The Pinancial system is made up of !inancial institutions that bring borrowers and lenders together ¤ Financial markets: institutions through which borrowers and lenders come together directly ¤ bond markets n stock markets n ¤ Financial intermediaries: organizations that interact with borrowers and lenders separately and bring them together indirectly banks n mutual fund n 2 Financing a company ¨ How can a company raise funds? Self-‐!inance ¤ Borrow indirectly...
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...200 500 x 200 = 100,000 Total Incremental Cost *Then, we calculate the Profit - The difference between the Incremental Revenue – The Incremental cost $ 660,000- $ 100,000 = $ 560,000 Incremental Profit Initial outlay=cost of lift + preparing and installing cost =2,000,000 + 1,300,000 = 3,300,000 The before-tax cash flow is then: Year 0: -3,300,000 Year 1-20: 560,000 Before-tax NPV is then -3,300,000 + 560,000 ( 1/1.14 + 1/1.142 +…+ 1/1.1420 ) =-3,300,000 + 560,000 x 6.62313055 =-3,300,000 + 3,708,953.11 = 408,953.11 Because the NPV is positive, it is then a profitable investment. 2. The After Cash Flow = 100%- 40% = 60% Net Income = $ 560,000 60% x $ 560,000 = $ 336,000 = The After Tax Cash Flow The rate of return will drop to 8% The NPV factor for 20 years @ 8% = 9.8181. To find the tax savings on the investment I multiply the investment amount of $3.3 million times the tax rate of 40% to find the tax savings of $1,320,000.00. The NPV of the after tax cash flow is taking the after tax net income ($336,000) 336,000 x 9.8181 = 3,298,881 Tax savings: 3,300,000 x 40% = 1, 320,000 To determine the NPV of the tax savings: Tax savings ($1.32 million) x NPV factor (6.62313055) = $8,742,532.33 =...
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...the recently promulgated Voluntary Pension System Rules. Pension reforms are essential to ensure that the macroeconomic gains of the last few years are passed on to the masses. While there has been an exponential rise in consumer spending, the saving rate has remained alarmingly low. Moreover, due to inflationary pressures, the real value of money is continuously reducing. Cognizant of this fact, the government introduced the Voluntary Pension Scheme (VPS). Currently both private and public sectors offer occupation savings schemes in the shape of provident funds and gratuity schemes. However, in their truest sense, provident funds and gratuity schemes are not retirement products. Fund withdrawal, job switching and loans against the schemes are a norm. Invariably, individuals are therefore left with depleted savings at the time of retirement. The introduction of VPS, managed by private pension fund managers, will aid mobilisation of savings, which in turn will help individuals become self-reliant in old age, reduce financial liability for government and employers at large and relieve financial obligation for younger generations. The salient features of VPS are that all Pakistani nationals over 18 years old holding a valid National Tax Number or Computerised National Identity Card may participate. Moreover overseas Pakistanis with a National Identity Card for Overseas Pakistanis may also join the scheme. The individualised pension account is in the name of the investor and customised...
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...Income Limitations on Lifetime Learning Credit The amount of the Lifetime Learning Credit is limited over a phase-out range. If your adjusted gross income is below the phase-out, your credits are not reduced. If your income is in the middle of the phase-out range, your credits will be reduced. If your income exceeds the phase-out range, you are not eligible to claim the Lifetime Learning tax credit. Below is the income phase-out range for the year 2011: • $51,000 to $61,000 : Single, Head of Household, or Qualifying Widow • $102,000 to $122,000 : Married Filing Jointly The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit. The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. The tax credit is scheduled to have a limited life span: it will be available...
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...AN ANALYSIS OF THE EFFECTS OF MARGINAL TAX CUTS SAYANTAN MITRA In my last paper, I argued in favor of the across-the-board tax-cuts proposed by the Republican presidential candidate Mitt Romney. With the help of instances from both micro as well as macroeconomics, I showed how a reduction in marginal and corporate taxes was beneficial for the economy. I used the growth in Gross Domestic Product (GDP) as a measure of the positive direction which the economy would take as a result of tax-cuts. I used empirical evidence to show that the tax-cuts on previous occasions have resulted in economic growth and increase in GDP of the United States. My detailed arguments and results can be found in the Appendix. In this paper I will analyze the effects of marginal tax-cuts on the different income groups, the high income and low income households. I will also analyze the variations in marginal propensity to save taking account demographic characteristics such as age group and education level as well as income. This would aid in an analysis of which portions of the population would be benefitted from a tax-cut. Therefore, I would like to would policy prescriptions for cutting taxes. When there is a reduction in payroll tax rates, it can have different effects on the different parts of the population. For low-income households, a tax-cut would encourage them to work for more hours. On the other hand, for high-income households, it may lead to them working lesser. These can be explained...
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