What is tax expenditures?

What is tax expenditures?

Instructions: There are 2 responses to read below. Write a 100 word response for each one.

Response 1)

What is tax expenditures? Tax expenditures are basically tax breaks that benefit a particular organization or group of people. These particular groups are tax payers who receive special provisions. These provisions can be classified as exclusions, deductions, or even credits that these groups, organizations, and individuals receive. “The congress Budget and Impoundment Control Act of 1974 defines tax expenditures as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” (Urban Institute, Brookings Institution, and individual, 2020) Examples of tax expenditures would be the tax write off we are able to calculate on our taxes. These right offs could be charitable contributions, or even the interest paid on mortgages or student loans. These particular expenditures do not really help to those who have lower income household, or those who are senior citizens. Those who benefit from this particular expenditures have a home, have higher incomes and wages, and are generally younger in age. “As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy.” (1 Timothy 6:17 English Standard Version) Christ calls us to be be fruitful and to have plenty. What is the impact of tax expenditures? Tax expenditures create an efficient system. Expenditures also create a system that has some equity. “These provisions can reduce the overall progression of the tax system and distort economic behavior.”

Mikesell, J. L. (2018). Fiscal administration: analysis and applications for the public
sector (10th ed.). Boston, MA: Cengage Learning. ISBN: 978-1305953680.

https://www.taxpolicycenter.org/briefing-book/what-are-tax-expenditures-and-how-are-they-structured (Links to an external site.)


Response 2)

A value-added tax (VAT) is a consumption tax placed on a product whenever fee is added at every stage of the furnish chain, from manufacturing to the point of sale. The quantity of VAT that the consumer will pay is on the value of the product, less any of the fees of materials used in the product that have already been taxed.

VAT applies to the majority of goods and services. VAT-registered businesses are effectively unpaid tax collectors, charging VAT on the merchandise they promote and paying the client tax on to HMRC. This doesn’t come without any remuneration, however. Many VAT-registered agencies shop cash with the aid of being registered, and the procedure is becoming less complicated and simpler with new legislation.

Businesses are in charge no longer solely to collect tax but to pay it on any of the purchases they make. Instead of transferring gathered VAT on to HMRC each and every time a transaction happens, agencies submit a VAT return indicating the total they’ve accrued and the total they’ve paid out within the tax quarter or year, depending on the scheme they adopt.

An example of a 10% VAT in sequence via a chain of production might show up as follows:

A producer of electronic components purchases uncooked materials made out of a range of metals from a dealer. The metals dealer is the seller at this factor in the manufacturing chain. The dealer expenses the manufacturer $1 plus a 10-cent VAT, and then sends the 10% VAT to the government.

The manufacturer makes use of the uncooked materials to create electronic components, which it then sells to a mobile phone manufacturing enterprise for $2 plus a 20-cent VAT. The manufacturer sends 10 cents of the VAT it collected to the government and keeps the other 10 cents, which reimburses it for the VAT it until now paid to the metals dealer.


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What is tax expenditures


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