Give an example of a tax that you have paid in the past. Pretend for a moment you are a member of the group considering imposing this tax (city council, state legislature, etc). Give three reasons from the text to impose the tax. Give three reasons not to impose it. What would the economic theory from this section of the course have to say about your tax? Will it raise much revenue? Will it change purchase decisions?
“U.S. Supreme Court Justice Oliver Wendell Holmes once said, “Taxes are the price we pay for a civilized society.” One can argue about the extent and quality of the civilization that we receive for our tax dollars, but it can’t be denied that we do pay a lot for it.
In fact, when every tax is tallied – federal, state and local income tax (corporate and individual); property tax; Social Security tax; sales tax; excise tax; and others – Americans spend 29.2 percent of our income in taxes each year.
There are many different kinds of taxes, most of which fall into a few basic categories: taxes on income, taxes on property, and taxes on goods and services.
Property tax, sometimes known as an ad valorem tax, is imposed on the value of real estate or other personal property. Property taxes are usually imposed by local governments and charged on a recurring basis. For example, homeowners will generally pay their real estate taxes either once a year or as a monthly fee as part of their mortgage payment.
In some countries property tax revenue can lag behind the growth of national income when the tax assessments fail to reflect changes in the general level of prices. It can also be costly to collect.
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