Analyzing Sales Taxes

There are two types of sales taxes, general and unit.  General sales tax is a tax on all, or most, consumed goods and, sometimes, services. Some general sales taxes are specific to a particular type of good or service.  Furthermore, some items are exempt from sales taxes, and some groups, such as charitable and religious organizations, are exempt from paying these taxes.  

Ad valorem taxes are levied as a percentage of the purchase price of an item.  Ad valorem is Latin for “according to value.” If one item costs twice as much as another, the sales tax on the one item will be twice as much as the other.  All American retail sales taxes are considered ad valorem taxes, as are property taxes.  

Unit taxes are different from ad valorem taxes.  These are applied only to the number of physical units bought or sold.  The tax on gasoline might be 50 cents per gallon, for instance, or the tax on cigarettes might be $1.00 per pack.  The implication is that unit taxes are relatively flat, while ad valorem taxes rise and fall with pricing.  

Sales taxes, like income taxes, are based on values from current transactions.  Property taxes are not.  Property taxes require a hypothetical valuation process.  They are difficult to categorize briefly and have wide variation from place to place.  One common distinction is that of real property (land and structures or improvements erected on that land) and personal property (property which is not real property, such as factory equipment or jewelry).  Personal property is more readily relocated.  Each state or local government develops its own definitions, usually resorting to lists of property types by category.  Some governments tax personal property more heavily than real property.

Upon successful completion of this assignment, you will be able to:

  • Evaluate the approaches to the administration of major tax structures.

Resources

  • Review Chapter 2 in the textbook, The Politics of Public Budgeting.
  • Access and review the article “Addressing Appraisal Drift in Property Taxation: Alternatives to Traditional Taxation Methods.” 
  • Research how ad valorem taxes are calculated in the city you selected in Workshop One.
  • Compose a four-paragraph paper based on your reading and research on that addresses the following:
    • Summary: Summarize the main points of the Dare, Goebel, and Isett article.
    • Connection: How are the ideas in this article reflected in the city you chose in Workshop One?
  • Your assignment should also:
    • Follow all conventions of academic writing as presented in the Academic Writing Visual.
    • Use properly formatted APA in-text citations.

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