Tax Policy Comparison of North Dakota and Georgia - Paper Example

Different states in the United States exercise different tax policies to raise their revenues. The State of Georgia and that of North Dakota, for example, have different policies on how they collect their taxes. Whereas North Dakota collects much of its revenue via sales tax and other miscellaneous taxes, Georgia gets much of its revenue from personal income tax and sales tax (Walczak & Drenkard, 2018). States collect revenue to finance various projects and services. Taxes make up to 40% of the total revenue for different states (Department of Revenue, 2020). The other forms of revenue are non-tax related include federal funding, fees as well as lottery revenues. The type of taxes that state governments levy includes excise taxes, corporate taxes, individual income taxes, and sales taxes. Tax policies guide the process of imposing taxes on people, and they ensure taxes imposed are easy to comply with, simple to understand, visible, and transparent, as well as able to promote stability and predictability.

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North Dakota and Georgia utilize different tax rates in their revenue collection. In 2017, for instance, North Dakota used the individual income tax rates that range from 1.1%-2.9% (Walczak & Drenkard, 2018). A person's tax liability depends on the person's tax bracket. A tax bracket can be defined as the range of earnings to which a particular tax rate is imposed. For spouses who have a joint filling, similar tax rates to those who are single apply to income brackets that range from 67,050 to 440,600 (Tax Policy Center, 2020). On the other hand, Georgia used an individual income tax rate of between 1-6% during the same year (Tax Policy Center, 2020). Spouses filing jointly had the same tax rates to those who are single for those earning between $1,000-10,000 (Tax Policy Center, 2020). States collecting individual income tax permit people to claim individual exemptions on income levies annually. The exemptions articulate that only incomes that surpass a particular set range are to be taxed. The personal income tax rates for both North Dakota and Georgia follow the tax policy criteria of keeping taxes fair, simple to conform to, and easy to collect. The income brackets make it easier to classify people into categories of their tax brackets. Again, setting the percentage ranges of taxes enables the government to categorize and estimate the amount of tax to be collected (Minnesota Center, 2019). The taxes are fair since people acquiring lower incomes that do not meet the tax threshold are cushioned from paying taxes. The state of Georgia, for instance, exempts single people earning less than $2,700 from remitting taxes. The states use broad bases, coupled with low rates and few exemptions to enable their citizens to pay reasonably low tax amounts. Such lowers the cost of enforcement of the taxes while increasing people's conformity to the tax policies.

Capital gains tax is levied by both the state of Georgia and that of North Dakota. This is a tax collected on the profits obtained from the sale of capital assets like homes, parcels of lands, businesses, and other personal things (North Dakota, 2020). The sale of capital assets is taxable at both the state and federal level. Whereas the federal administration taxes capital gains lowly as compared to individual income, states normally levy capital gains at a similar rate with normal income. In 2015, the highest tax rates for capital gains in North Dakota were 3.2% while that of Georgia was 6% (Georgia State University, 2020). All states have sales taxes that vary, with North Dakota having a sales tax of 5% in 2017 while Georgia had a sales tax of 4% the same year (Georgia State University, 2020). Sales taxes are among the most transparent ways of collecting tax revenue. Sale taxes are easy to comprehend, and consumers can locate their taxes printed on the receipts. This enables the two states to implement the tax policy criteria that need taxes to be visible and transparent. Consumers are able to see the amount of taxes that they pay for different goods. Besides state sales taxes, customers also pay local tax rates. Such rates can be significant, and therefore, states with moderate sales tax rates might possess high compiled state and local rates than other states. For Dakota, the mean local tax was around 1.78%, which implies that the sum of compiled sales tax was 6.78% (North Dakota, 2020). For Georgia, the mean local tax was around 3%, implying that the mean compiled sales tax was 7% (Georgia State University, 2020). Another form of taxes imposed on sales is the excise taxes, which are taxed on the sale of certain goods or services. Excise levies are indirect taxes since they are not charged from people in a direct manner. Occasionally, excise taxes are paid by the manufacturer or the person selling the product or service. The tax is included in the price of the product and passed down to the customer. Excise taxes differ for each given item, and with different states. For instance, the excise tax imposed on fuel in North Dakota in 2017 was 23 euros compared to 26 euros in Georgia (Walczak & Drenkard, 2018). Both Georgia and North Dakota have made their sales and use taxes easy to see and comply with, and visible and transparent. Such criteria allow people to know the amount of taxes they remit.

Corporate income tax is another form of revenue collection that many states use to collect revenue. This is a tax that is levied on the company's profits by different states. Many states in the United States impose this tax on companies found within their jurisdiction. Just like in other taxes, the rates here keep varying from one state to the other. Whereas some states opt to use a flat rate to calculate such taxes, other states use the bracket system that determines the rate depending on the company's earnings (Department of Revenue, 2020). Corporate taxes account for less than 6% of the total tax revenue accumulated by states (Tax Policy Center, 2020). North Dakota imposed a corporate tax rate that ranged from 1.41-4.31% as of 2016 statistics, while Georgia, using the flat rate approach, imposed a corporate tax rate of 6% in 2016 (Tax Policy Center, 2020).

Property taxes regularly apply to real estate, but some states apply them to other individual properties like vehicles. Tax rates and tax bases determine a person's property tax liability, which depends on the value of the property and the portion of the evaluated property that is taxable. Property taxes vary from one locality to the other within a given state. Property taxes contribute to a big portion of the local government revenues. During 2010, property taxes contributed to 75% of local government revenues (Department of Revenue, 2020). Oppositely, states tend to collect very little revenue from property taxes as evidenced in 2010, where the property tax collected contributed to only 2% of their revenues (Department of Revenue, 2020). Nonetheless, states that fail to collect personal income tax and sales tax may accrue more revenue from property taxes. Before determining a property tax liability, the value of the said property must be determined. During the assessment of the property, its market value and its assessment value are important. Assessed worth is significant for tax purposes, and is determined by putting an assessment ration on the market value. After calculating the assessed value of the property, the value might be cut further by exemptions. The commonest exemption in many states is the homestead exemption that permits a predetermined sum to be deducted from the assessed value of the primary residences. Property tax liability is calculated by putting the millage rate on the taxable value of the property. In 2012, North Dakota collected $2,530 while Georgia collected $1,698 on property taxes (Department of Revenue, 2020). Property taxes align with the tax policy criteria that focus on encouraging stableness and predictability of taxes. Tax systems need to be stable and predictable so that both the government and the people plan themselves. The governments of the state of Georgia and that of North Dakota have tried to use broader tax bases and lower tax rates to encourage steady remittance and use of taxes. Both governments also diversify their tax collection to avoid overreliance on one source of revenue collection.

Both the state of Georgia and that of North Dakota levy motor fuel tax. This tax is levied on all kinds of fuels that may be used for propelling automobiles that include fuel oils, gasoline, special fuels, and compressed petroleum gas. As of January 2017, the tax rate for motor fuel tax in Georgia was 26.4 cents for every gallon of motor fuel except diesel, and 29.6 for each gallon of diesel fuel (Georgia State University, 2020). From July 2016, the excise tax rates are altered yearly by the percentage rise or decline in the Consumer Price Index and the mean fuel economy of fresh automobiles. In North Dakota, motor fuel tax attracts a tax of 23 cents for each gallon of automobile fuel including gasoline and gasohol bought by retailers and consumers (North Dakota, 2020). Consumers that paid 23 cents for each gallon and used the fuel in non-licensed equipment for agricultural purposes might get a refund of 22.5 cents per gallon (North Dakota, 2020). The state, as well as the political division, may attract a tax total refund for fuel used for construction, maintenance, and reconstruction of roads and highways. Further, emergency medicine operations might get a total tax refund for fuel used in ambulances.

The state of Georgia and North Dakota imposes tobacco tax on all tobacco products. Such tax is levied on the sale, purchase, possession, consumption, handling, receipt, use, and distribution of cigarettes and cigars in Georgia. In Georgia, cigarettes attract a levy of 37 cents for each pack of 20 cigarettes as well as a pro-rata rate for packages sized otherwise (Georgia State University, 2020). Small cigars that weigh less than three pounds are levied at $2.50 per 1,000. Other cigars are levied at a rate of 23% of the entire cost price (Georgia State University, 2020). In North Dakota, the tobacco tax is collected at different tax rates. Cigarettes that weigh below three pounds per 1,000 are levied at 22 mills for each cigarette or 44¢ and 55¢ for packages of 20 and 25 cigarettes, respectively (North Dakota, 2020). Cigarettes that weigh above three pounds are levied 22.5 mills each. Cigars and pipe tobacco are levied at 28 percent of the cost price (North Dakota, 2020).

Tax policies guides how different governments impose taxes and should be fair, simple, visible, transparent, encourage stableness, and predictability. The state governments of Georgia and North Dakota compare significantly on how they impose their taxes. Both countries use a broader tax base, low tax rates, and reduce exemptions. This way the countries are able to let their people to obey tax remittance. On the sales and use taxes, both states print the taxes on the items so the consumers can see them and seek accountability for their taxes. The tax policy criteria are important in guiding how different governments tax their people.

References

Department of Revenue. (2020). Department of Revenue Annual Statistical Reports. https://dor.georgia.gov/department-revenue-annual-statistical-reports

Georgia State University. (2020). Georgias taxes: A summary of major state and local government taxes (Twenty-Sixth Edition). Fiscal.