Obama vs. McCain Taxe Plan

September 12, 2008 Feeding Friends-z No Comments

This is snapshot from CNN on the tax plans proposed by both of the US presidential candidate running in 2008

How tax systems work

September 12, 2008 Feeding Friends-z No Comments

In order to demonstrate that consumers are the ultimate taxpayers let
us consider a simple example. Suppose there is a small kingdom in which
there exists a single trading company that supplies all needs. The King
imposes a taxation system to support his government of the kingdom.
This is shown in the diagram below, indicating the annual flow of
money. Entity A is the trading company; it makes no profits. There is a
sales tax imposed on all sales from its shop amounting to 15% of sales
revenue.

B, C and D are employees of the trading company and are taxed
according to the income they receive at respectively, 30%, 20% and 10%.
That is, it is a progressive income tax regime that taxes the high
earner proportionately more then the lower earner, just as we
experience today in our system.

Each employee buys everything from the trading company shop and
so does the King. How much tax do they pay? The diagram shows the
input/outputs of each entity and the interconnections, very like an
electrical circuit. The total output of money from an entity must equal
the total money it received. The combinations of these transactions can
be shown in a matrix of outputs versus inputs, where the sum of all the
numbers in a row must equal the sum of all the numbers in the
corresponding column. For example, Row B sums to 200 and column B sums
to 140+60 = 200. Also, the numbers which are units of money that flow
on a annual basis, and the matrix completely define the circulation of
money around the economy. For example, for the outputs from A, see the
column headed A. 200 is paid to B, 100 is paid to C and 50 to is paid
to D. In row K, for each of the columns, sales tax 60, and income taxes
60, 20 and 5 are the taxes paid to K, the King.

Link to diagram

http://ecforster.netfirms.com/Tax/Doc1.html

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