Section 4- Other Flashcards
What is a progressive Tax
US Income Tax
Why is federal property not taxed
It would violate the efficiency principle. There would be an administrative cost of assessing and collecting the tax, simply to pass money from one government account to another
Pg 113: Lawmakers consider collection efficiency when setting tax policies. This means that the cost of collecting the tax should be minimal compared to the revenue generated. For example, sales taxes are collected at the point of sale. Sales registers compute the tax due and add it to the purchase price. This is far more efficient and reliable than asking individual consumers to keep track of all their purchases and remit sales tax to the state treasury.
An example sometimes used to illustrate the “efficiency” principle is non-taxation of state and federal real estate. Why should a government go to the trouble to assess and levy taxes on itself? There would be an administrative cost to assessing and collecting the tax, and the result would simply be to recycle some government funds through the treasury.
Tax Expenditure
tax expenditure is an exemption, credit or other reduction in tax liability that is enacted to promote certain desirable activities.
Tax Expenditures Exceptions to tax laws and regulations are called tax expenditures because they “cost” the public in terms of lost revenue that could otherwise be used to fund programs or reduce tax rates. For 2019, GAO stated that tax expenditures are comparable to the size of Federal Discretionary Spending, approximately $1.32 trillion.2 Tax expenditures exist because policymakers have decided that the social benefit exceeds the lost revenue.
For example, IRS regulations allow homeowners to deduct interest on home mortgages from their adjusted gross income—this is a tax expenditure at the national level that encourages home ownership. As other examples, states may offer tax deductions or credits for child adoption expenses, or for the costs of installing energy-saving technology in a home.
Advantage of Income Taxes
Relative Advantages Income taxes have several relative advantages:
1. They are generally less costly to administer than other taxes. (Consider that a real estate tax requires a physical appraisal of property values, and an estate tax requires legal proceedings.)
- Compliance levels tend to be high.
- Finally, income taxes respond to general economic conditions, such as inflation and recessions so that the tax impact varies with the economic fortunes of taxpayer
What poses the greatest challenge in a real property tax system
The greatest challenge in a real property tax system is appraisal and assessment. The property must be appraised to determine market value; it must be reappraised periodically; the appropriate assessment ratio (percentage) must be applied. Then, the tax rate is applied to assessed value. This process is technically challenging and politically sensitive. (NOTE: The challenge is the appraisal, not the assessment. The assessment is easy. The other challenge is the collection of the tax.)
Shared Revenue
(127)- Shared revenues are another form of intergovernmental funding. This term is usually associated with revenue sharing among states and local entities. In many instances, shared revenues are provided with few constraints so that local entities have maximum flexibility. They are often distributed per a formula, such as population per county or (in the case of shared gasoline taxes) miles of road per county. Counties often collect an occupancy tax on hotel rooms and share the proceeds with towns and cities in its jurisdiction.
Grantor Expectations:
For any type of grant or shared revenue, certain basic expectations are held by the grantor (entity that provides the grant). The first of these is accountability. The grantor expects proper control and management of transactions, and full accountability for the funds provided. “Accountability” typically means the grantor expects the following:
* the types of services provided comply with the terms of the grant (in the case of block grants, the terms will be broad);
* the end recipients are eligible for the services provided;
* the difference between allowable and unallowable program costs is recognized and upheld; and
* any requirements for matching funds or matching level-of-effort are me
In recent years there has been a trend toward “devolution” of government, in which the federal government allows state and local governments more control over execution of programs. Which of the following is most likely associated with devolution
Increase in block grants. Block grants transfer resources to state and local governments, and allow maximum local discretion in how the resources are applied.
formula grants
Intergovernmental grants can be broadly classified as project grants (sometimes called discretionary grants) or formula grants. Formula grants can be further classified as categorical grants or block grants. These terms are sometimes used interchangeably, resulting in confusion, but a brief discussion will help clarify the differences
With formula grants, a formula contained in law or regulation determines the recipients and amounts of awards. Of course, the funds must be appropriated and laws can change, but formula grants are more stable and predictable than project grants. Depending on the broad purpose, formulas may include population characteristics, such as poverty levels or per capita income, degree of substandard housing, rate of unemployment or miles of highway. Once basic eligibility is satisfied, the formula determines the total amount of the grant.
Many employment and training grants are formula grants, such as those provided by the U.S. Department of Labor (Labor) to implement the Workforce Innovation and Opportunity Act (WIOA). See the illustration below.
Grant/Shared Revenue:
127-For any type of grant or shared revenue, certain basic expectations are held by the grantor (entity that provides the grant). The first of these is accountability. The grantor expects proper control and management of transactions, and full accountability for the funds provided. “Accountability” typically means the grantor expects the following:
* the types of services provided comply with the terms of the grant (in the case of block grants, the terms will be broad);
* the end recipients are eligible for the services provided;
* the difference between allowable and unallowable program costs is recognized and upheld; and
* any requirements for matching funds or matching level-of-effort are met.
Increasingly, grantors are expecting the grantees to report outputs and outcomes of grant programs in measurable terms. When a multi-period grant is awarded, the grantor expects the funds to be encumbered and spent according to the schedule in the award agreement.
The grantor may also expect the recipient to comply with certain cross-cutting requirements. This refers to broad goals of the grantor that are not directly related to the purpose of the grant. For instance, whatever the purpose of the grant, recipients may be required to uphold certain civil rights and environmental protection objectives while administering the grant program.
Grant/Shared Revenue:
127-For any type of grant or shared revenue, certain basic expectations are held by the grantor (entity that provides the grant). The first of these is accountability. The grantor expects proper control and management of transactions, and full accountability for the funds provided. “Accountability” typically means the grantor expects the following:
* the types of services provided comply with the terms of the grant (in the case of block grants, the terms will be broad);
* the end recipients are eligible for the services provided;
* the difference between allowable and unallowable program costs is recognized and upheld; and
* any requirements for matching funds or matching level-of-effort are met.
Increasingly, grantors are expecting the grantees to report outputs and outcomes of grant programs in measurable terms. When a multi-period grant is awarded, the grantor expects the funds to be encumbered and spent according to the schedule in the award agreement.
The grantor may also expect the recipient to comply with certain cross-cutting requirements. This refers to broad goals of the grantor that are not directly related to the purpose of the grant. For instance, whatever the purpose of the grant, recipients may be required to uphold certain civil rights and environmental protection objectives while administering the grant program.
Executive branch agency encourage use of service
Lower use fees.
User Fees Governments also obtain resources through user fees. A user fee is a charge imposed on the specific beneficiary of a good or service. User fees range from the admission charge for a state arboretum to monthly tuition at a municipal day-care center. User fees provide flexibility to cover unexpected costs. For instance, following the attacks of September 11, 2001, a new security charge was added to airline tickets to help cover increased security costs. The charge is only paid by airline travelers, so it is a user fee rather than a tax.
One way governments receive resources is through donations. How are donations different from user fees and taxes?
Unlike taxes, they are voluntary. Unlike user fees, they do not convey any privileges on the donor.
: Governments also receive funds through donations. These are voluntary contributions that confer no rights or benefits on the giver. Donations are more common than you might think.
A city “adopt a pothole” or “adopt a sidewalk” program is based on donations. A school district may receive donations for new playground equipment. A state university may receive a multimillion-dollar donation for medical research. And when citizens file their annual federal income tax forms, they are invited to make a donation to reduce the national debt.
Many local governments usually require developers to install the infrastructure associated with a development, such as water lines, sewer lines, sanitary sewers, street lighting, roads, etc. Some also require land to be donated for park purposes. When the projects are completed, the developer deeds them to the government.
Donations are not always voluntary. For instance, each year the Transportation Security Agency collects valuable property, including cash, which travelers leave behind at airport security checkpoints.
restructuring of debt
Entities restructure debt when they issue new debt (usually at lower interest rates) to pay off older debt. They do it for the same reason homeowners refinance their mortgages—to save money.
Which best describes a Local Government Investment Pool (LGIP
The LGIP operates much like a mutual fund, but the investors are exclusively government entities. The LGIP may contain only local government resources, or may mingle state and local government funds.
