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1. Retailers collect the tax on behalf of the customer so the customer might not realize they are paying sales taxes. What are advantages and disadvantages from the above-mentioned feature of sales tax? Be sure to answer this from the perspective of both the retailer and customer.
2. Imagine you are a tax policy analyst for New Jersey. You asked to advise the governor on a way to reduce the regressivity of the sales tax. Would you recommend a sales tax exemption or a sales tax credit? In your response, please address the following questions:
Which option is better for tax equity?
Which option is better for tax neutrality?
Which option is better for administrative feasibility?
3. Imagine you are trying to figure out a family’s state income tax liability. Below is the following information about the family’s income situation:
The total income was $80,000
$5,000 of the total income came from a nontaxed source (i.e., a $5,000 gift from their parents)
The state allows a personal income tax exemption of $1,000 per adult and $1,500 per child. There are two adults and two children in the family.
They are homeowners and can deduct the property taxes they paid this year ($10,000)
They paid for daycare this year. Assume they qualify for a $500 tax credit.
Assuming the tax rates are the same as NJ (see slide 25 for full list of tax rates), how much do they owe in state income taxes? What is their effective tax rate? What is their marginal tax rate?
4. Calculate the state income tax liability for another family. Below is the following information about their income situation:
• Their total income was $40,000 and all of their income is taxable.
• The state allows a personal income tax exemption of $1,000 per adult and $1,500 per child. There are two adults and two children in the family.
• They are renters and the state allow renters to deduct 18% of their total annual rent. Assume they rented a rent-controlled apartment this year at $600 per month.
• They provide their own childcare at home. Therefore, they have no childcare expenses that qualify for a tax credit.
Assuming the tax rates are the same as NJ (see slide 25 for full list of tax rates), how much do they owe in state income taxes? What is their effective tax rate? What is their marginal tax rate?
Based off your calculations, evaluate the tax equity of this state’s income tax. Make an argument for why this income tax structure is fair. Additionally, make an argument for why this income tax structure is not fair.
5. Continue to work on your revenue analysis project. Specifically, start your research on:
• Describing and explaining the revenue structure of the government unit. What sources of revenue does it rely on? What comprises each source’s tax base? What are the tax rates? How similar are they compared to neighboring government units (in terms of tax base and tax rates)?
• Based off your research above, does your unit of government have a diverse set of revenue sources? What revenue sources does the unit of government lack? Should they include other revenue sources? Why or why not?
The government unit under consideration is New Jersey. New Jersey’s revenue structure is composed of a variety of sources, including taxes, fees, and other non-tax sources. Tax sources include personal income tax (PIT), corporate business tax (CBT), sales and use tax, estate taxes, inheritance taxes, hotel occupancy taxes, and realty transfer fees.
The PIT applies to all taxable wages earned in the state. It has four tiers with differing rates ranging from 1.4% to 8.97%. The CBT applies to business entities that are either incorporated or doing business in the state and imposes different rates depending on the type of entity and its total net worth. The sales and use tax applies to tangible goods purchased within NJ at a rate of 6.625%. Estate taxes apply when an individual dies with more than $675,000 in taxable assets ($2 million for married couples) at a rate up to 16%. Inheritance taxes are applied at different rates based on the relationship between the deceased person and their heir(s). Hotel occupancy taxes are imposed on each day a person stays in a hotel room within NJ at a rate up to 12%, while realty transfer fees apply when property is sold or transferred within NJ at an effective rate up to 2%.
Overall, New Jersey’s revenue structure includes many diverse sources which provide both stability and flexibility for fiscal planning purposes by allowing decision makers in Trenton access to multiple streams of income supplemented by non-tax revenue such as federal grants, intergovernmental transfers (IGTs), proceeds from asset sale/leasing operations (such as toll roads), etc.. This diversified approach helps insulate the budget from downturns associated with one particular sector or source of revenue; however it does not exempt it entirely from volatility due raising property values/prices or cyclical fluctuations led by regional/national economic trends.
Compared with neighboring states like Pennsylvania ,New York , Connecticut & Delaware ,NJ’s PIT top bracket & CBT Business minimum Tax Rate is generally lower . But their Sales & Use Tax Rates are higher . Their Estate Taxes also have much higher exemption thresholds than those found elsewhere . Furthermore ,their Hotel Occupancy Taxes vary significantly depending upon local county regulations so they can be difficult for visitors who may not be familiar with these differences . Finally , Realty Transfer Fees tend toward being relatively consistent across states but tend toward being among the highest if compared regionally . All together this means that NJ’s overall system tends toward having some advantages over neighboring governments while still providing them enough resources through various forms of taxation necessary for financing public services & infrastructure projects without unduly burdening citizens too heavily since most everyday consumer items such as food & clothing remain untaxed unlike some other states where such items may bear additional burdensome costs that can disproportionately affect poorer households’ disposable incomes more severely than those making greater sums annually ..
In conclusion ,New Jersey’s current revenue structure appears well balanced overall although there may be room for improvement when it comes adding additional taxation measures beyond what already exists . However , any potential changes should prioritize equity first before neutrality before administrative feasibility considerations so that taxpayers’ willingness abide by existing laws remains high enough ensure compliance sufficient maintain budgetary health long into future regardless changing political climate might bring about during upcoming years ahead no matter what direction takes next after current administration departs office ..