There are at least three different types of tax strategies that could be used to
ID: 2487279 • Letter: T
Question
There are at least three different types of tax strategies that could be used to fund a policy: regressive taxes, progressive taxes, and general tax revenue. Which tax strategy is used for the following programs and why? Medicare Medicaid Social Security Schools TANF Military/Defense Discuss what you think of the methods of taxation for each program and whether you think any changes should be made. Explain why or why not. Finally, express whether you think funding is adequate for each of these programs, and explain your answer.
Explanation / Answer
Answer
A regressive tax is a tax that takes a larger percentage from low-income people than from high-income people. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder.
Some examples include gas tax and cigarette tax. For example, if a person has $10 of income and must pay $1 of tax on a package of cigarettes, this represents 10% of the person's income. However, if the person has $20 of income, this $1 tax only represents 5% of that person's income.
Sales taxes that apply to essentials are generally considered to be regressive as well because expenses for food, clothing and shelter tend to make up a higher percentage of a lower income consumer's overall budget. In this case, even though the tax may be uniform (such as 7% sales tax), lower income consumers are more affected by it because they are less able to afford it.
A progressive tax is a tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.
The U.S. progressive income tax is effectively a means of income redistribution. Individuals who earn more pay higher taxes; those taxes are then used to fund social welfare programs that are used primarily by individuals who earn less.
General tax revenue : Governments collect revenues mainly for two purposes: to finance the goods and services they deliver to citizens and businesses and to fulfil their redistributive role. Comparing levels of government revenues across countries, as a share of GDP or per capita, provides an indication of the importance of the public sector in the economy in terms of available financial resources. The total amount of revenues collected by governments is determined by past and current political decisions. This indicator is measured in terms of thousand USD per capita and as a percentage of GDP.
Medicare and Medicaid are two different government-run programs that were created in 1965 in response to the inability of older and low-income Americans to buy private health insurance. They were part of President Lyndon Johnson’s “Great Society” vision of a general social commitment to meeting individual health care needs. Medicare and Medicaid are social insurance programs that allow the financial burdens of illness to be shared among healthy and sick individuals, and affluent and low-income families.
Medicaid is not the same as Medicare.
In the United States, Social Security is primarily the Old-Age, Survivors, and Disability Insurance (OASDI) federal program. The original Social Security Act was signed into law by President Franklin Roosevelt in 1935, and the current version of the Act, as amended, encompasses several social welfare and social insurance programs.
Social Security is funded through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Tax deposits are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, or the Federal Supplementary Medical Insurance Trust Fund which make up the Social Security Trust Funds. With a few exceptions, all salaried income, up to an amount specifically determined by law has a FICA or SECA tax collected on it. All income over said amount is not taxed. For 2015 the maximum amount of taxable earnings was $118,500.
For most public schools the funding comes from three different levels. The federal government does not officially fund or govern education; this is within the purview of each state. However, the government does mete out a significant amount of funding to states for education based on criteria set by the federal government, therefore it does exert some influence over the state-run systems with its funding. The state governments gather and distribute a significant amount of funding for schools through state sales and income taxes, lotteries, and property taxes. Local governments also often contribute through their respective taxation systems as well.
The military budget is the portion of the discretionary United States federal budget allocated to the Department of Defence, or more broadly, the portion of the budget that goes to any military-related expenditures.
No, funding is not adequate for each of these programs as the number of retired Americans will increase must faster than the number of workers “as subsequent lower-birth-rate generations replace the baby-boom generation at working ages.”
To run each of these programs successfully in long run, It is necessary to implement progressive tax strategy for all of above programs.
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