Taxes are the primary revenue source for governments and governmental administration at all levels. Generated by levies on property, sales, income and other sources, taxes fund public services and programs along with government payrolls and countless other things.
Public administrators have the responsibility of overseeing and administering this process. Dealing with taxes is a highly specialized task that should be undertaken by professionals who have backgrounds in both finance and public administration. Degree programs such as Ohio University’s online Master of Public Administration can provide the training needed for this function along with a general overview of the scope of public fiscal administration. Candidates for this type of work can find satisfaction in contributing to the benefits of public administration to society while steering their organizations through complex financial waters.
Types of Taxes
The website Debt.org summarizes the many types of taxes paid by American citizens. These taxes fall into three basic categories: taxes on income, property and goods and services.
Taxes on income include:
- Income tax. The federal government, 43 states, and many local municipalities levy income taxes on personal and business revenue, or interest income. Usually the greater the income, the higher the rate of taxation. Current federal rates range from 10% to 37%. State and city rates are generally much lower.
- Payroll tax. Employers must subtract payroll taxes of 7.65% from their workers’ paychecks each pay period, and then match the sums deducted. This money goes to fund the nation’s Social Security system and Medicare.
- Capital gains tax. This tax is paid on any profits made from the sale of an asset and is usually applied to stock and bond transactions. Profits from the sale of real estate are also subject to a capital gains tax.
- Estate tax. This federal tax is imposed on the transfer of property upon the death of the owner. Many states also impose their own estate tax, sometimes known as an inheritance tax.
Taxes on property include:
- Property tax. This tax is imposed on the value of real estate or other personal property. Property taxes are usually imposed by local governments and charged on a recurring basis. For example, homeowners will generally pay their real estate taxes either once or twice a year or as a monthly fee as part of their mortgage payments.
- Real estate tax. This is an amount paid upon the purchase of property. It is based on a jurisdiction’s assessment of the property’s worth based on its condition, location and market value.
- Personal property tax. This is an annual tax on assets that move, such as mobile homes, RVs, cars, boats, planes and so on. The owner pays a registration or license fee each year which includes the tax amount.
Taxes on goods and services include:
- Sales tax. Retail purchases are taxed at a percentage of the sales price. This tax is most commonly used by state and local governments. It can vary widely from one type of good to another.
- Excise tax. This is similar to sales tax, but it is based on the quantity of an item and not on its value. For example, the federal government imposes an excise tax of 18.4 cents on every gallon of gas purchased, regardless of the price charged by the seller. States sometimes charge an additional excise tax on federally taxed goods.
- User fees. These taxes are assessed on a wide variety of services, such as airline tickets, rental cars, toll roads, utilities, hotel rooms, licenses, cellphones and financial transactions.
- Sin tax. This tax is imposed on items such as cigarettes and alcohol.
- Luxury tax. This tax is imposed on items such as expensive cars or jewelry.
How Taxes Are Spent
Federal and state/local taxes have a considerable difference in their spending. At the federal level, 80% of tax income goes to five major items:
- National defense and security (20%)
- Social Security (20%)
- Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) (20%)
- Safety net programs (14%)
- Interest on the national debt (6%)
At the local level, by far the largest expenditure is K-12 education (26%). This expenditure is followed by Medicaid and the Children’s Health Insurance Program (17%) and higher education (15%). Transportation, corrections and public assistance come in at 6%, 5% and 1%, respectively. The remaining 32% is a mix of smaller expenses covering everything from employee wages and pensions to environmental projects, state police, parks and recreation, and general aid to local governments.
Balancing the Budget
A governing body’s income may vary a little bit from year to year, depending on what citizens do that incurs a tax. But the amount is fairly predictable. Unfortunately, it is not changeable. A government cannot go out and fundraise or increase sales to make more money, like a for-profit company.
Public administrators understand this reality. Their job involves working within the financial boundaries imposed by tax income — a situation that can be frustrating because needs always seem greater than the available funds. An advanced education can help public administrators successfully ensure that a government agency runs smoothly, efficiently and within budget.
About Ohio University’s Online Master of Public Administration (MPA) Program
Ohio University’s online MPA program is dedicated to preparing professionals for a career in public administration. Through the university’s prestigious Voinovich School of Leadership and Public Affairs, students gain an overview of the scope of public administration work while building skills in policy, finance, leadership, business, management, and communications. The school occupies the No. 12 spot in the SR Education Group’s 2019 Best Online Colleges Offering MPA Programs ranking.
The program, which is 100% online, offers four concentrations: Crisis and Emergency Management, Public Leadership and Management, Non-Profit Management, or State and Local Government Management. Students can finish their degree programs in as few as two years. For more information, contact Ohio University now.
Types of taxes – Debt.org
How federal tax dollars are spent – How Stuff Works
How state/local tax dollars are spent – Center on Budget and Policy Priorities
Balancing the budget – U.S. News & World Report