If your like many, you don’t always understand what people are talking about when it comes to Taxes. It’s important to know the main tax terminology, especially when tax season comes around. Knowing the basics will make tax season less of a hassle for you, and maybe even save you some money. there are hundreds of terms; below are some of the most important:
A Tax Form is the form that is filled out and submitted to your government to report all of your tax information for the past year.
An audit refers to an unbiased examination and evaluation of the financial statements of an individual or organization such as a business. Audit’s are performed for the purpose of ensuring that accounting records are fair and consistent, and are following the guidelines laid out for the individual or organization.
Capital Gain refers to the amount of money made on Capital during a given tax period. for example if you own a house, and over the past year the value of your house increased by twenty thousand dollars, you would have to claim this twenty thousand dollars as a capital gain in your income taxes.
Capital Gain refers to the amount of money Lost on Capital during a given tax period. for example if you own a house, and over the past year the value of your house decreased by twenty thousand dollars, you would have to claim this twenty thousand dollars as a capital loss in your income taxes.
Child Tax Credit
Child tax credits are tax credits that are given to the caregivers for each dependent child, that at the end of the tax year is under 17.
Flat tax refers to a system where everyone is taxed at the same rate, regardless of how much they earn.
Gross income is an individuals or corporations total income before any taxes or deductions have been applied to the sum.
Net Income is the total amount of income after all deductions and expenses.
Property tax is a tax that is assessed on real estate value by a local government.
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The term 9-9-9 has been etched into the minds of American voters since Herman Cain touted his tax plan during a Republican Primary debate. why not? It’s simple, easy to remember, and it’s associated with Herman Cain and his run for the White House. It could be easily argued that Herman Cain’s 9-9-9 plan is what has launched him to the top tier of Republican nominees. As brilliant as it is as a marketing tool for the Herman Cain campaign, it has also been successful in steering the conversation towards our broken tax system. a system that is not only complicated, but also favors some over others. The American economy is in trouble and our country is plagued with record deficits and debt. There are three main ways that we, as a nation, can address this problem. Unfortunately, only two of these solutions have been front and center as The President and Congress continue to bicker over higher taxes and less spending. The third and most sensible solution that Herman Cain’s 9-9-9 plan addresses is growing the economy.
Right now, the American economy is growing at a mediocre 1.2% GDP quarter over quarter and job creation is stumbling along at anywhere between zero jobs and below 100,000 jobs created month over month. What is needed to kick start the economy is tax reform, and that is what 9-9-9 is all about. The plan calls for a 9% corporate tax, a 9% personal income tax, and a 9% consumption tax. It basically takes aspects of the flat tax and the fair tax and puts them together. Even better, Herman Cain’s plan gets rid of the old tax system so there will be no more loopholes, deductions, and credits. It’s fair in that everyone pays the same. It’s transparent in that the government will no longer be able favor one industry over another via tax breaks. It would cut down on the amount of lobbying in Washington D.C. and will save tax payers billions of dollars a year when they go to file their tax returns. Think about it, billions of dollars back in the hands of consumers year after year which is much better than a one-time stimulus plan.
Of course, Herman Cain and his 9-9-9 plan has its critics. There are three main problems that naysayers of Herman Cain’s plan point to. first, is that such a plan would never be passed. Millions of Americans want tax reform, and Herman Cain, as President, could use the power of the bully pulpit to put pressure on Congress to institute such change. Cain could single out members of Congress and their lobbyists that are resistant to his plan and target them during their re-elections. Also, there are many in Congress that are in favor of restructuring the tax system so a 9-9-9 plan or something similar could get done. The second problem is that many are afraid that the 9% consumption tax would create a new government revenue stream that could easily be raised by a future Congress and President. In reality, if a future Congress is ruled by a supermajority, supported by a President of the same party, they could raise taxes and create new ones at will anyway. a 9% consumption tax being implemented now has nothing to do with a future government. The final argument against 9-9-9 is that a consumption tax is regressive and penalizes the poor. What the 9-9-9 plan does, is get rid of all the hidden taxes that occur during the production of goods and therefore, those goods will be cheaper to produce. Since they are cheaper to produce, the price of the goods will not go up and the poor won’t see any difference at all. In fact, Herman Cain’s plan will introduce empowerment zones which would either eliminate or lessen the consumption tax for essential goods in poor and urban areas. Not only would this relieve the tax burden on the poor, but would also stimulate private investment in areas that businesses normally stay away from.
Pro growth policy should be at the forefront of fixing our ailing economy instead of draconian spending cuts and raising taxes. Herman Cain’s 9-9-9 plan is easy to understand and has encouraged millions of Americans to engage in the debate. if Herman Cain’s poll numbers, despite limited funds, are an indicator of public sentiment, it is evident that 9-9-9 or something similar is what Americans want when it comes to creating jobs and getting our economy headed in the right direction.
As the name suggests, flat rate tax is a system of tax where a pre determined fix tax rate is levied on the income and profits. Still, it is a controversial system that has its opponents. An example of a tax rate includes a scenario where everyone pays a 25 percent tax on the profits irrespective of the amount of profit.
Those opposing a flat tax system argue that the flat rate doesn’t differentiate between the rich and the poor. It should be noticed that it is far easier for a rich person to pay the 25 percent of their income and maintain a healthy lifestyle in comparison to a poor who will be hard-hit by dispersing the quarter of his pay check. just for the same reasons many nations in the world have adopted a flat tax system but with certain restrictions.
Hong Kong – Case Study
The prime example of such a nation is Hong Kong. Hong Kong applied steeply progressive rates on the salaries which make sure that a person with a fat paycheck is paying more than a blue collar worker. Various other economies in the world have taken measures to implement changes in their flat tax rate that will allow an even distribution of the profits. There are four income tax brackets in the Hong Kong, namely 2%, 8%, 14% and 20%. Due to a clearly marked tax rates, it is easier for a majority of population to understand their liabilities. That’s not it Hong Kong also allows its citizens to keep a large portion of the income spent on charitable causes, adult care, child care and retirement savings plan. the tax system has been so successful in Hong Kong that an average citizen is not even bothered about the taxes on salaries and income. also notice that the tax system is flexible in certain condition but is largely fixed when it comes to the corporate profits and related private spending. the corporate tax is around 17.5 percent and in some cases it is fixed at 18 percent.
Fixed Tax rate in the United States
Policy makers in the United States and some other Western countries have pointed out the fixed tax rate system of Hong Kong as a premier example of a model tax system, to follow. For example, the system allows corporations to pay the tax before paying the actual dividends. if implemented in the United States, such a process will wipe out the need for paying double taxes, once on income and other on the dividend. It is due to the long term implications of the system that few states in United States have already adopted a flat rate on household incomes.
The Hong Kong fix tax rate system is being considered by many nations including Poland and Greece. the theory is already gaining approval from the newly formed nations in the World, particularly the ex-communist regimes. It will be in the interest of nations around the world to study the Hong Kong tax system that has provided a solid foundation to the world’s premier economy for decades.