This picture, though, is distorted by numerous exclusions. First, the tax base – the income that is taxed – is generally much less than total income due to an array of adjustments, deductions, omissions, and mismeasurement .
Second, the tax burden – the hurt caused by taxes – is not borne entirely by the people who write the checks to the Internal Revenue Service. To some extent many taxes are «shifted» to other members of society. For example, because highly progressive taxes discourage people from entering high-paying professions, salaries in these professions will be higher than otherwise.
Therefore, the taxes paid by the upper-income taxpayers who do enter these professions overstate the true burden of taxation on them. Also burdened by these high taxes are the people who pay higher prices for the goods and services provided by the people with higher salaries. On the other hand, taxes paid by high-income people who take advantage of the federal tax exemption for interest on state and local government bonds understate their true burden.
Third, the progressivity of the tax structure cannot be judged by looking at only one component of taxes. Federal income taxes are only about 25 percent of total revenues collected by all levels of government. In recent years the fastest-growing component of federal taxes has been the payroll tax, which is regressive (the opposite of progressive) in its impact, because it taxes at a flat rate only on wages below $63,400 (in 1991). The Social Security system, however, is progressive because it pays higher benefits – relative to taxes paid in – to lower-income workers.
Слова и выражения:adjustment – уточнение, приспособление
array – набор, множество
borne – несомый, выносимый
civilized – цивилизованное
determine – определять
distort – искажать
emulate – состязаться, оспаривать
entirely – целиком, полностью
exclusions – исключения
fraction – часть
impact – воздействие, удар
judge – судить, оценивать
markedly – значительно, заметно
mismeasurement – неправильные измерения
omissions – исключения
overstate – переоценивать, преувеличивать
progressivity – прогрессивность
rapidly – быстро
recovery – выздоровление, оздоровление
regressive – регрессивный
understate – недооценивать, преуменьшать
vary – быть разнообразным, варьироваться
tax liability – обязательства по налогообложению
average tax rate – средняя ставка налогообложения
tax base – база налогообложения
total income – совокупный доход
tax burden – бремя налогов
Internal Revenue Service – Национальная налоговая служба
to some extent – до некоторой степени
discourage from – отвращать от, лишать мотивации ( к чему-либо )
take advantage – воспользоваться преимуществом
tax exemption – вычет из налогов
payroll tax – налог на фонд заработной платы
flat rate – единая ставка, ставка пропорционального налогообложения
Social Security system – система социального обеспеченияExercise 3
Answer the questions:
1. What does the progressivity of taxes determine?
2. What is a progressive tax?
3. How do we state the relative progressivity of tax structures?
4. How did the progressive taxes change in the eighties in the developed countries?
5. How is the tax burden shifted from taxpayers to other members of the society?
6. What fraction of the overall tax return is made up by the US federal income taxes?Marginal Tax Rates
The marginal tax rate is the rate on the last dollar of income earned. This is very different from the average tax rate, which is the total taxes paid as a percentage of total income earned.
In the United States the concept of marginal tax rates is most familiar as tax brackets. Rapid inflation in the seventies pushed many skilled working couples up into the 50 percent tax bracket (then the highest rate on labour income). That did not mean that all of their income was taxed at a 50 percent rate. Instead, the first ten thousand dollars or so might be taxed at a 12 percent rate, the next ten thousand at a higher rate, and so on. Once the 50 percent bracket was reached, though, the workers lost an incentive to work, as they had to pay as taxes more than they earned.
The marginal tax on added earnings matters because it is easier to earn less than to earn more. To increase income, people have to study more, accept added risks and responsibilities, relocate, work late or take work home, tackle the dangers of starting a new business or investing in one, and so on. People earn more by producing more and better goods and services. If the tax system punishes added income, it must also punish added output – that is, economic growth. While reducing marginal tax rates, it is possible to encourage people to earn and report more income.
Several economies that seemed on the verge of bankruptcy in the early eighties were suddenly revived once marginal tax rates were reduced. In 1983 to 1984, Turkey\'s marginal tax rates were slashed: the minimum rate dropped from 40 to 25 percent, the maximum from 75 to 50 percent. Real economic growth jumped to nearly 7 percent in the following four years and to 9 percent in 1990. Like Turkey, South Korea was deep in debt to international banks in 1980, when real output fell 2 percent. Korea subsequently cut tax rates and expanded deductions three times, and economic growth averaged 9.3 percent a year from 1981 to 1989. In the early eighties the African island of Mauritius faced an unemployment rate of 23 percent and massive emigration. Tax rates were cut from 60 percent to 35 percent, and the economy grew by 5.4 percent a year from 1981 through 1987. Egypt, Jamaica, Colombia, Chile, Bolivia, and Mexico had similar experiences after slashing marginal tax rates.
Maximum Marginal Tax Rates on Individual Income
Despite widespread adoption of such policies, few seem to understand what marginal tax rates are and why they matter. In the United States, for example, it is commonly believed that the Reagan administration «slashed taxes» particularly for «the rich». Actually, real (that is, inflation-adjusted) federal receipts increased by one-third from 1980 to 1990. Moreover, the most affluent 5 percent of all taxpayers paid 45.9 percent of all federal income taxes in 1988 – uprate of 70 percent to 33 percent – became actual tax increases, particularly for «the rich». The explanation for this paradox lies in the critical distinctions between average and marginal tax rates, and between «static» effects right now and «dynamic» effects over years and decades. Dynamic effects include increased intensity and motivation of work effort, more efficient investment, and more innovation and risk taking. Слова и выражения:
adoption – принятие
affluent – богатый
bankruptcy – банкротство
concept – идея, концепция
critical – критический, определяющий
deduction – вычет, скидка, льгота ( по налогообложению )
despite – несмотря на
distinction – различие, отличительная особенность
drop – ронять, падать
dynamic – динамический
expand – расширять(ся)
experience – опыт
familiar – знакомый, известный
intensity – интенсивность
jump – прыгать
matter – значить, иметь значение
motivation – мотивация
percentage – процент, процентное соотношение
push – толкать, выталкивать
rapid – быстрый
relocate – переезжать, менять местоположение
revive – возрождать(ся)
similar – подобный, сходный
slash – рубить
static – статичный, статический
subsequently – впоследствии
tackle – заниматься ( чем-либо ), приниматься ( за что-либо )
verge – стоять на краю, «балансировать» на краю
widespread – широко распространенный
marginal tax rate – приростная (маргинальная) ставка налогообложения
average tax rate – средняя ставка налогообложения
total taxes – общая сумма налоговых отчислений
tax bracket – категория налогоплательщиков, налоговая «ниша»
taxed at a 50 percent rate – облагается налогом по ставке в 50 процентов
once the …. was reached – как только … бывает достигнута
added earnings – добавленный доход, дополнительный заработок
accept added risks – принимать на себя дополнительные риски
report income – заявлять о доходах
be in debt – быть в долгу
inflation-adjusted – соотнесенный с инфляцией, «привязанный» к темпам инфляции
federal receipts – поступления в федеральный бюджетExercise 4
Answer the questions:
1. What is the marginal tax rate?
2. What do Americans mean by the marginal tax rate?
3. Why does the marginal tax on added earnings matter?
4. How do the marginal tax rates affect the general output of the economy?
5. What happens to people\'s income if the government reduces the marginal tax?
6. What happened to some economies on the verge of bankruptcy when they slashed the marginal tax rates?
7. How did the reduction of the marginal tax rates in the USA affect the total tax revenues?
8. Who pays the most of the taxes in the USA?
9. What is the difference between average and marginal tax rates?