Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 4 The Economics of the Public Sector
Chapter 12 of 36 The Design of the Tax System
Section 6 of 22
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Payroll taxes are also called social insurance taxes because this revenue pays for Social Security and Medicare.
Social Security is the federal government program mostly for paying pensions to those age 62 and older.
Medicare is the federal healthcare program for those aged 65 and older.
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Corporate income tax generates about 14% of federal government tax receipts.
Government taxes corporations on their profits.
Corporate profits are taxed twice
· first, as corporate income tax on corporation profits
· second, dividends from profits sent to shareholders are taxed as individual income
In 2003 the tax rate on dividend income was reduced to 15%.
One reason for this was to compensate for this double taxation.
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The last “other” tax category shown in Table 2 generates 7% of receipts.
This category includes
· excise taxes, which are taxes on specific goods like gasoline, cigarettes, and alcoholic beverages
· various smaller items, such as estate taxes and customs duties
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customs duties
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