Both payroll taxes and income taxes are based on an employee’s wage or salary. The main difference between each tax is who end up paying the tax. Employers pay most of an employee’s payroll taxes while just the employee pays the income taxes. Both taxes end up coming from employee’s salary. Typically in America, employees end up paying more payroll taxes than they do income taxes. This paper is going to look at the differences between payroll taxes and income taxes and will also explain what “wage shifting” is and when it occurs.
Payroll taxes are taxes that employers and employees pay to the federal government from an employee’s salary. The amount of payroll taxes paid comes from a percentage of the salary that employers pay to their staff.
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At the lowest level of employment such as minimum wage employers must pay a set payroll tax per employee they hire. In order off set this burden on employer, employers attempt to reduce the salaries they pay to their employees. Since employers cannot reduce the amount they pay to employees at the minimum wage level, they end up reducing the number of employees they hire. This is what is known as “wage shifting”. Basically payroll taxes at this level cannot be shifted to minimum wage employees because their wages cannot be lowed to a level that offsets the burden of the tax. This causes a problem for low wage workers in attempting find work because getting hired causes a burden on employers, which they are not willing to pay.
In conclusion, the difference between payroll tax and income tax is the person that ends up paying that tax. Employers pay payroll taxes, while the employee pays income tax. Wage shifting occurs when employers attempt to shift the burden of the payroll tax on to employees. Yet at the minimum wage level employers cannot lower wages any further and as a result they end up hiring less
Let’s begin by defining exempt and non-exempt. Non-exempt employees are those that are paid on an hourly basis and receive overtime compensation at one and one-half times their base pay for all hours worked in excess of some standard threshold. In most cases this “threshold” is 40 hours, but that is not always the case. Dividing the annual salary by 2080 to give a base hourly amount can derive the base pay for most, not all but most, employees. Exempt employees are those that do not receive compensation of any kind for hours worked in excess of whatever the threshold maybe. By definition of law exempt employees must be paid on a salary basis and job duties performed by said employee must be high-level such as executive, administrative or professional. To decide whether an employee meets the criteria for being exempt, there are two tests – the duties test and the salary basis test.
Understanding the basic concept of minimum wage is important for every single individual. We all live in this world together and it is obvious that there is an order. In order to continue our lives and afford our basic needs, we all need to work and gain wealth. As the old adage says ‘‘There ain’t a such a thing as a free lunch.’’ We need to give up on something that we like to get something else that we like. That’s why, every single individual in the society face trade-offs. However, people have different status. Some people work as employees and some work as employers. In that case of minimum wage the trade off is between employees and employers. Employees work for employers in order to gain money and afford their minimal living expenses whereas employers give up on their money and pay for employees because employers take care of their need of labor. Employers pay for their workers who we call employees and employees gain hourly money. The calculated minimum money that they gain in an hour base called minimum wages. Besides, there is this cycle that everyone actually works
Tax law changes every year. Laws are updated, loopholes are blocked and other modifications are generated. A few of these changes affect essentially each of the wage earners while others could impact primarily small businesses or higher-income taxpayers.
Taxes are the dollars that we pay to government to supply the services that are not or can not be provided through the free enterprise system. Taxes have been around since the beginning of organized societies. They come in various forms. Most common are income taxes both federal and local government. These taxes are assessed on the amount of income a person earns. Other taxes come in the form of user taxes; these taxes are imposed on the people that are using the goods being taxed, such as gas tax, alcohol tax, sales tax, and luxury taxes. Property taxes make up the major revenues for local and city governments. Furthering the burden of taxation are taxes that are attached to such bills as utility bills and rental expenses.
The United States tax system is in complete disarray. Republicans and Democrats agree that the current tax code is complex, unfair, and costly. The income tax system is so complex; the IRS publishes 480 tax forms and 280 forms to explain the 480 forms (Armey 1). The main reason the tax system is so complex is because of the special preferences such as deductions and tax credits. Complexity in the current tax system forces Americans to spend 5.4 billion hours complying with the tax code, which is more time than it takes to manufacture every car, truck and van produced in the United States (Armey 1). Time is not the only thing that is lost with the current tax system; Americans also lose great deal of money complying with the tax code. Resources that are currently wasted on record keeping, filing forms, learning the tax code, litigation, and tax avoidance. The cost of complying with the current tax code totals about $200 billion annually, or $700 for every man, woman, and child in America (Armey 1). The overwhelming consensus that the current tax system is inadequate has ignited the search for tax reform. There are numerous proposals for tax reform; one particular proposal brought forth by various conservatives is the idea of national flat rate income tax. The idea is to replace the current income tax with a single rate that everyone pays.
Taxation is as old as civilization itself. Kings and governments collected tribute from their peasants and citizens even before the invention of currency. Taxes in a form of cattle and labor were popular. However, in the modern era every industrial nation taxes their citizens though multiple ways. Federal income tax and sales tax are some examples of government taxation. Taxation is essential for any government, as it is their primary source of income. For instance, the Internal Revenue Service, a U.S. government agency responsible for tax collection, “receives over 140 million individual tax returns and collects over $950 billion in taxes” (Wood). Considering taxation is human made, it does have flaws that affect both the poor and the rich.
however,the salaries would be less due to an increase in taxestaken out used to help pay for
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
Gender Pay Gap also referred to as Gender wage gap, gender income difference or male-female income difference refers to the difference between the earning of men and women (Victoria, 2006). The European Union defines the Gender Pay gap as the difference between men and women’s hourly earnings (OECD, 2012). The difference may be measured on hourly, weekly, monthly, or yearly earning. The difference is expressed as a percentage of the men’s earning. However, the difference varies from one industry to another, from one country to another and from one age group to another. On average, men earn higher than women do across different sectors and nations.
The government use of taxes plays a crucial role in today’s economy as well as personal finances, it has and will continue to leave its mark on the world we live in.
The four types of taxes this paper will discuss are income tax, sales tax, property tax, and user fees. Income tax was not permanently established until the 16th Amendment was passed in 1913. Most federal taxes had been previously derived from excise taxes on tobacco and alcohol and other consumer goods. The US Constitution, when written and still continues to, legitimize taxation in the United States through Article I, Section 8, that Congress has the power to lay and collect taxes, duties et al, pay the debts or provide for the common defense and general welfare of the United States (Cornell Law LII). Investopedia defines income tax as ‘a tax government(s) impose on financial income generated by all entities within their jurisdictions (Investopedia, 2014). Businesses and individuals are required to file an income tax return every year to determine if they owe taxes or qualify for a refund. That is determined by measuring the total income one earns to a designated tax rate, calculating one’s taxable income, which are some or all items of income reduced by other adjustments or expenses in that tax year. There are different subcategories of income tax; there is a federal income tax that is set by the federal government, apart from a few states, there is a state income tax that is imposed on their respective residents, as well as the possibility of there being local income tax ...
Tax rate refers to the percentage of the tax base, which is settled in tax. It is the tax charged by the government on a taxpayer’s income.
Wage differentials are the different rates of pay for the same general type of work, due to a variety of reasons such as differences in performance. Marginal productivity is the difference in how much a worker produces compared to another. There are many reasons for the difference in wages within an industry such as the amount of risk involved, the amount of human capital the individual has and the differences in productivity and amount contributed to the firm. These are just three of many reasons for differences in wages rather than just marginal productivity. There are also external reasons for wage differences that may have nothing to do with individual’s
A tax, as defined by the Taxation UWI text book, is a legal obligation to pay a certain percentage of income or profits to government imposed on taxpayers, that is, any person or organization required by law to pay tax. Legal penalties would be forced upon taxpayers for failure to make tax payments.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...