Project 1: Flat tax, Modified Flat Tax, and Progressive Tax. Income Taxation Many people have proposed various revisions to the income tax collection in the United States. Some, for example, have claimed that a flat tax would be more fair. Others call for revisions to how different types of income are taxed, since currently investment income is taxed at a different rate than wage income. The following project will allow you to explore some of these ideas and draw your own conclusions. In your small groups, discuss and document the following 3 tax proposals. Complete one document to upload to the Assignment folder on D2L. You will also be given a peer evaluation to fill out. Project details: Imagine a country is made up of 100 households. (I will allow you to make up the name of your country.) The federal government needs to collect at least $800,000 in income taxes to be able to function. They don't want to over tax the population or they citizens will revolt. The population consists of 6 groups: Group A: 20 households that earn $12,000 each Group B: 20 households that earn $29,000 each Group C: 20 households that earn $50,000 each Group D: 20 households that earn $79,000 each Group E: 15 households that earn $129,000 each Group F: 5 households that earn $295,000 each This scenario is roughly proportional to the actual United States population and tax needs. We are going to determine new income tax rates. Putting the pieces together Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally. 1) For each income group, estimate their essential expenses, and calculate their discretionary income 2) Then compute the effective tax rate for each plan relative to discretionary income rather than income. (Take the rate from the previous work and apply that percentage to the discretionary income.) 3) Write a group paragraph explaining how your group arrived at this data (include your costs for necessities). Amount remaining after taxes and essential expenses... use the information from your previous two tables to calculate this value. (Subtract taxes here.) Group A $12,000 $29,000 B $50,000 D E $79,000 $129,000 $295,000 F Final Conclusion: Which plan seems the most fair to you, proposal 1, 2 or 3? Which plan seems the least fair to you, proposal 1, 2, or 3? Why? (Your final response should be around 300 words.) Project 1: Flat tax, Modified Flat Tax, and Progressive Tax. Income Taxation Many people have proposed various revisions to the income tax collection in the United States. Some, for example, have claimed that a flat tax would be more fair. Others call for revisions to how different types of income are taxed, since currently investment income is taxed at a different rate than wage income. The following project will allow you to explore some of these ideas and draw your own conclusions. In your small groups, discuss and document the following 3 tax proposals. Complete one document to upload to the Assignment folder on D2L. You will also be given a peer evaluation to fill out. Project details: Imagine a country is made up of 100 households. (I will allow you to make up the name of your country.) The federal government needs to collect at least $800,000 in income taxes to be able to function. They don't want to over tax the population or they citizens will revolt. The population consists of 6 groups: Group A: 20 households that earn $12,000 each Group B: 20 households that earn $29,000 each Group C: 20 households that earn $50,000 each Group D: 20 households that earn $79,000 each Group E: 15 households that earn $129,000 each Group F: 5 households that earn $295,000 each This scenario is roughly proportional to the actual United States population and tax needs. We are going to determine new income tax rates. Proposal 1 The first proposal we'll consider is a flat tax - one where every income group is taxed at the same percentage tax rate. 1) Determine the total income for the population (all 100 people together). Show your work! 2) Determine what flat tax rate would be necessary collect enough money. Show your work! 3) What are the pros and cons of a flat tax? Proposal 2 The second proposal we'll consider is a modified flat-tax plan, where everyone only pays taxes on any income over $20,000. So, everyone in group A will pay no taxes. Everyone in group B will pay taxes only on $9,000. 1) Determine the total taxable income for the whole population. Show your work! 2) Determine what flat tax rate would be necessary to collect enough money in this modified system. Remember, the government needs $800,000. Show work! 3) What are the pros and cons for this plan? 4) Complete this table with the data for both the plans (I will include a Word document on D2L with all of the following tables to help you with this part . You should be able to copy and paste into your project document.) Flat Tax Plan Modified Flat Tax Plan Group Income per household A $12,000 B $29,000 C $50,000 D $79,000 E $129,000 F $295,000 Totals Remember... The totals at the end should be at least 5800,000, but not over by much. How close can you get. (Bonus to the group that gets closest to $800,000 and not under.) Proposal 3 The third proposal we'll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. The percentage increases as the income increases. For simplicity, we're going to assume that a household is taxed at the same rate on all their income; this is different from the current United States system. 1) Set progressive tax rates for each income group to bring in enough money. You need to create a progressive tax... Everyone gets taxed some rate other than 0%, the rate progressively increases. I would like your group to try and come up with a FAIR rate. (yes... groups have tried to only tax the rich and not the poor. This is not a progressive rate. That is a modified flat-rate.) 2) Explain why you think this rate is fair. Your explanation should consider real-life in the United States. There is no one right answer here. I ask that you seriously ponder this question to come up with what your group considers fair. (Food for thought, 10 years from now you will probably be making a higher income.) Your explanation should be at least 250 words. Group Income per Tax rate household (%) Income tax per household Total tax collected for all households Income after taxes per household A $12,000 B $29,000 $50,000 D $79,000 $129,000 E F $295,000 Project 1: Flat tax, Modified Flat Tax, and Progressive Tax. Income Taxation Many people have proposed various revisions to the income tax collection in the United States. Some, for example, have claimed that a flat tax would be more fair. Others call for revisions to how different types of income are taxed, since currently investment income is taxed at a different rate than wage income. The following project will allow you to explore some of these ideas and draw your own conclusions. In your small groups, discuss and document the following 3 tax proposals. Complete one document to upload to the Assignment folder on D2L. You will also be given a peer evaluation to fill out. Project details: Imagine a country is made up of 100 households. (I will allow you to make up the name of your country.) The federal government needs to collect at least $800,000 in income taxes to be able to function. They don't want to over tax the population or they citizens will revolt. The population consists of 6 groups: Group A: 20 households that earn $12,000 each Group B: 20 households that earn $29,000 each Group C: 20 households that earn $50,000 each Group D: 20 households that earn $79,000 each Group E: 15 households that earn $129,000 each Group F: 5 households that earn $295,000 each This scenario is roughly proportional to the actual United States population and tax needs. We are going to determine new income tax rates. Putting the pieces together Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally. 1) For each income group, estimate their essential expenses, and calculate their discretionary income 2) Then compute the effective tax rate for each plan relative to discretionary income rather than income. (Take the rate from the previous work and apply that percentage to the discretionary income.) 3) Write a group paragraph explaining how your group arrived at this data (include your costs for necessities). Amount remaining after taxes and essential expenses... use the information from your previous two tables to calculate this value. (Subtract taxes here.) Group A $12,000 $29,000 B $50,000 D E $79,000 $129,000 $295,000 F Final Conclusion: Which plan seems the most fair to you, proposal 1, 2 or 3? Which plan seems the least fair to you, proposal 1, 2, or 3? Why? (Your final response should be around 300 words.) Project 1: Flat tax, Modified Flat Tax, and Progressive Tax. Income Taxation Many people have proposed various revisions to the income tax collection in the United States. Some, for example, have claimed that a flat tax would be more fair. Others call for revisions to how different types of income are taxed, since currently investment income is taxed at a different rate than wage income. The following project will allow you to explore some of these ideas and draw your own conclusions. In your small groups, discuss and document the following 3 tax proposals. Complete one document to upload to the Assignment folder on D2L. You will also be given a peer evaluation to fill out. Project details: Imagine a country is made up of 100 households. (I will allow you to make up the name of your country.) The federal government needs to collect at least $800,000 in income taxes to be able to function. They don't want to over tax the population or they citizens will revolt. The population consists of 6 groups: Group A: 20 households that earn $12,000 each Group B: 20 households that earn $29,000 each Group C: 20 households that earn $50,000 each Group D: 20 households that earn $79,000 each Group E: 15 households that earn $129,000 each Group F: 5 households that earn $295,000 each This scenario is roughly proportional to the actual United States population and tax needs. We are going to determine new income tax rates. Proposal 1 The first proposal we'll consider is a flat tax - one where every income group is taxed at the same percentage tax rate. 1) Determine the total income for the population (all 100 people together). Show your work! 2) Determine what flat tax rate would be necessary collect enough money. Show your work! 3) What are the pros and cons of a flat tax? Proposal 2 The second proposal we'll consider is a modified flat-tax plan, where everyone only pays taxes on any income over $20,000. So, everyone in group A will pay no taxes. Everyone in group B will pay taxes only on $9,000. 1) Determine the total taxable income for the whole population. Show your work! 2) Determine what flat tax rate would be necessary to collect enough money in this modified system. Remember, the government needs $800,000. Show work! 3) What are the pros and cons for this plan? 4) Complete this table with the data for both the plans (I will include a Word document on D2L with all of the following tables to help you with this part . You should be able to copy and paste into your project document.) Flat Tax Plan Modified Flat Tax Plan Group Income per household A $12,000 B $29,000 C $50,000 D $79,000 E $129,000 F $295,000 Totals Remember... The totals at the end should be at least 5800,000, but not over by much. How close can you get. (Bonus to the group that gets closest to $800,000 and not under.) Proposal 3 The third proposal we'll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. The percentage increases as the income increases. For simplicity, we're going to assume that a household is taxed at the same rate on all their income; this is different from the current United States system. 1) Set progressive tax rates for each income group to bring in enough money. You need to create a progressive tax... Everyone gets taxed some rate other than 0%, the rate progressively increases. I would like your group to try and come up with a FAIR rate. (yes... groups have tried to only tax the rich and not the poor. This is not a progressive rate. That is a modified flat-rate.) 2) Explain why you think this rate is fair. Your explanation should consider real-life in the United States. There is no one right answer here. I ask that you seriously ponder this question to come up with what your group considers fair. (Food for thought, 10 years from now you will probably be making a higher income.) Your explanation should be at least 250 words. Group Income per Tax rate household (%) Income tax per household Total tax collected for all households Income after taxes per household A $12,000 B $29,000 $50,000 D $79,000 $129,000 E F $295,000