How Progressive Tax Works in Practice

To say that the percentage of tax you pay is determined by the amount you earn can mislead people. Although an individual who earns $60,000 will pay a higher tax rate than somebody who earns $20,000 they will not pay this higher rate for the full $60,000.

So let’s imagine that the individual who earns $20,000 will pay tax at a rate of 10%. The individual who earns $60,000 might pay 10% for the first $20,000 of their money, 15% on their earnings from $20,000 to $40,000, and 20% on all the money they earn above $40,000. As you can see here then they will not be paying the 20% rate for all their income; only the amount over $40,000. Working out the tax that people need to pay can be a bit complicated if you are not good with mathematics. Here the individual earning $20,000 would pay $2,000 while the person earning $60,000 would pay $9,000.

The above examples only give an idea of how things work in practice. In reality things can be a lot more complicated. People will be able to reduce their tax bill due to different available deductions. They will also pay a lot of tax on taxable goods. In fact, over the course of a year the individual may pay a lot more in sales tax then they have paid in income tax.

The Arguments for and Against Progressive Tax

There is a lot of support for a progressive tax system because it is considered fair. Those individuals who earn more money should be expected to give more back to society. Those who are less well off just can’t afford to pay a lot of tax so they shouldn’t be expected to. It is in everyone’s interest to prevent poverty and hardship within a society. This isn’t only for moral reasons but also for practical ones too. When poverty is high it leads to increasing crime and social unrest.

Other people argue that those who earn more money should pay a lower rate of tax. This would still mean that they would be pay more tax than the average person, but considerably less than they are now. This type of system is viewed as fairer to the rich who can pay huge sums of money each year in tax. It is argued that by allowing these people to pay less tax they will be more productive and this will be better for the economy.

Federal Accounting Standards Advisory Board

FASAB has been tasked with the job of developing accounting standards for federal agencies. The aim is to ensure that all financial reports are easy to read, relevant, and reliable. This agency is constantly working to improve the accounting systems within the organizations that fall under their control. The aim is not only to ensure that such government accounting complies with the law but that it is also as effective as possible.

Governmental Accounting Standards Board

GASB has the responsibility for developing standards which affect local and state organizations. Its role is very similar to FASAB but it is a private non-governmental body. The Financial Accounting Foundation oversees the work of GASB. It regularly provides technical updates and bulletins to ensure that accounting is as effective as possible at this level of public affairs.

How Government Accounting Works in Practice

Public sector entities not only have to consider their current funds but also any other money that will become available throughout the year. Most of this money will come from government funds or from local taxes. Decisions about how much money will be allocated to the different public sector departments will usually be made months in advance. It is important that these agencies are able to work out how much money they are going to need over a year so that they can know how much money they will need.

Budgets, Appropriations, and Encumbrances are the main method for splitting up government accounting and involve:

• Budgets are the money the public bodies will need for the year
• Appropriations refer to a particular amount of money that is set aside for a specific project. For instance, if there is a project to create a new back to work scheme there will be money set aside just for this. This money will then be considered separate from other funds as it will only be available for that one project. If there is a need to remove money from appropriations there will usually be a lot of paperwork involved.
• Government bodies will usually have costs associated with keeping them operating. This money is referred to as encumbrances. This fund could include things like payroll and purchases of new equipment.

Government accounting differs from the type of accounting used in an average business. It has to because it needs to because the environment is very different. This type of accounting faces special challenges because of the possibilities of waste. It is also a type of accounting that can come under a lot of scrutiny.

So what is an Omnibus Account?

An omnibus account is a kind of stock holding account where multiple investors are involved. This account is managed by a futures manager (sometimes called a money manager or stock broker). It is the job of this money manager to use the account to trade on behalf of all the different investors. With this type of account it does not have the name of the investors associated with it. Instead these investors are similar to stock holders but instead of having stock in a company they have stock in an investment account.

A similar idea to the omnibus account is the ‘street account’. Here the investor leaves stock in the name of the broker. This way the investor doesn’t have to be too involved with the responsibilities associated with owning stock. A lot of the work can be completely taken over by the broker so it is very convenient. So long as the broker is competent and working in the investor’s best interests it can work out very well. The main problem with this type of investment is that the actual stock owner will not be participating in the business.

The Benefits of an Omnibus Account

The main benefit of an omnibus account is that it tends to pay off dividends a lot more frequently than other types of investments. This type of account will tend to be managed by highly competent individuals how manage the money wisely in order to get the most profit without taking too many risks. The other nice thing about this type of account is that it usually allows the investor to keep a very close eye on what is going on with their investment.

The overall benefit of the omnibus account is that it cuts out a lot of red tape. Buying and selling stock takes time and effort, but the individual managing the account can do this for everyone involved. The fact that this individual will be highly competent should mean that they make good decisions. The fact that they will be depending on success themselves to get paid means that they too are heavily invested in making the investment a success. They will also have lots of relationships within the investment community that will give them the edge when it comes to making profits.

An omnibus account is going to suit a lot of individuals but it probably is not a good choice for everyone. It is always important to consider the pros and cons of such an investment before choosing it. It is vital that the money manager handling the account is highly competent with a good reputation.

• You need to seek out those sellers that specialize in dealing with customers who have bad credit. You can find out about such dealerships online or from people you know. There are a lot of people in a similar situation so you are likely to find these car sellers in most urban areas.
• One thing that you should expect when looking for finance with bad credit is to be asked to pay a deposit. The amount this will be varies but it is unlikely that you will get any credit without providing this. If you are unable to put down sufficient funds now you may have to wait and save some money.
• All that the finance agent really wants to know is that you are good for any money they lend you. You need to be able to convince them that you will be able to make the repayments despite your bad credit rating. You do this by providing documentation of your income and available spare cash that you will use to pay off the car. You will be expected to provide documents such as payslips, bills, and proof of address.
• You will probably be asked to pay a higher interest rate than lenders with a good credit rating. Think about this carefully and make sure that the vehicle is going to be worth the expense.
• You will want to check out a few options before deciding on the best deal. Remember that if one finance company is prepared to give you a loan that there are sure to be others. If you just accept the first finance you are offered it will be unlikely that you have found the best deal.
• Never agree to any finance repayment scheme unless you are sure that you can live with it. Work on the amount of money you can afford to pay now and not on expectations of improved finances in the future. If you can’t afford the repayments on the car don’t ask for finance.
• You are more likely to get finance for a car that is considered high quality. This does not mean an expensive car but one that is considered dependable.

The Benefits of Backward Integration

The decision to choose backward integration is huge decision for any business. They need to be sure that such a maneuver is going to lead to increased profit. If they were to buy a supplier or vendor that wasn’t viable it could easily end up destroying both companies. The business then that is considering such a move will need to decide how it will be profitable. If it is one of their main suppliers then it may lead to huge savings in regards to these supplies. If the supplier has a good customer base then it may already be a good purchase because of the likelihood of continued profits.

If a supplier is charging too much for their products it can be another reason to choose backward integration. This is particular useful when the supplier has some type of monopoly over the supply in question – maybe they are the only business providing this product in a certain location. Rather than paying so much money for supplies the business may decide to buy the company. This way in future they can be sure of getting these supplies at a much more reasonable cost. Of course the company in question will need to agree to such an acquisition.

In some situations backward integration may involve a number of different businesses. This can occur when a supplier is struggling to stay in business and there is a risk that they could go bankrupt. If there are businesses that depend on this supplier then it may mean trouble for them should this supplier fail. It may not be feasible for one of these businesses to take over the supplier so instead a group of business may come together to acquire the supplier. That way they will all be sure of continued supplies without taking all the risk of buying the failing business. This type of backward integration can work out very well for everyone involved in it. The supplier will be able to make it through the tough period and those businesses that have acquired it will in future be able to get their supplies for a cheaper rate.

Some Final Thoughts on Backward Integration

There are many good reasons for why a business may decide to join forces with their suppliers or vendors. In many cases such backward integration will prove successful but there is always going to be at least some risk involved. This is especially true when a failing company is acquired unless the situation that is causing the poor performance is resolved.

Deductible.  The deductible is the amount you are responsible for paying should you ever be in the situation to have to make an insurance claim.  Let’s say you get into a little fender bender.  If your deductible is $500, then you will have to pay the first $500 and the insurance company will have to pay everything after that.  A very simple way to lower your insurance bill is to raise your deductible.  That only makes sense, considering  a higher deductible for you means less out of pocket for your insurance company.

Medical coverage duplications.  If you have health insurance with medical coverage, then it is just not necessary for you to carry that same coverage through your automobile insurance company.  It’s not like the insurance companies are going to pay double your bill, and you shouldn’t either.

Choice of vehicle.  Drive a car that’s cheap to insure.  If your car is safe, easy (and inexpensive) to work on, and not too tempting to thieves, then you can expect to pay much less for your insurance than if you were to drive a European sports car, per se.

Low mileage.  Many insurance companies offer low mileage discounts, so try to drive your car less often.  Car pool, take public transportation, or even walk or ride a bicycle when possible to lower both your car insurance bill and your carbon footprint.

Safety gear.  The more safety features your car has, the less expensive your insurance bill will be.  This pertains to air bags, anti-lock brakes, automatic seatbelts, and car alarms.

One carrier.  You can often get a discount on insurance by purchasing all of your insurance needs – homeowner’s, health, life, and auto – through one carrier.

Special discounts.  Ask your insurance company about any and all special discounts that they offer.  You might be surprised at what you qualify for, for being a student (or a parent of a student), a senior, a safe driver or more.

There are many ways to cut back on your auto insurance bill.  Call your insurance carrier today to see how many of these tips apply to you.

About the Author: Dona Collins is a freelance writer with a passion for saving money. When she’s not writing about personal finance she can be found teaching college graduates how to use IT staffing services and agencies to find new work.

So what is a Hardship Withdrawal?

The option to make a hardship withdrawal is not available with every 401k plan. There are also usually restrictions as to the circumstances you will be able to do this. If you just want a bit of cash to go on holiday with or to buy a car it is unlikely that the withdrawal will be permissible. Therefore you will need to check with your plan to see under what conditions you can make such a withdrawal. You are likely to find that the rules governing such early withdrawals are quite strict. The rules governing this type of transaction are usually referred to as safe harbor rules; it means that you need to meet specific criteria to qualify.

Safe Harbor Rules

The usual safe harbor rules that apply to hardship withdrawals include the following:

• If you or a dependent becomes sick and you are unable to pay medical expenses then this may mean that you qualify for a withdrawal under the safe harbor rules
• If you are about to be evicted from your home because of non-payment of rent or mortgage then this too could qualify you for a withdrawal.
• Funeral expenses are another possible justification
• If there has been a natural disaster and your home has been damaged then this too would be a good reason
• If you need money to pay for secondary education for one of your dependents then you may qualify for a hardship withdrawal

If you do manage to get a hardship withdrawal you will not be allowed to contribute to the plan again for six months after the withdrawal. This can be problematic because of the long term consequences and will put people off making such a withdrawal. The 401k companies introduce the six month rule because of its effectiveness in discouraging people from making such withdrawals.

In many ways the merchant banks and normal banks are very different. In fact to some of us it may seem that these other entities have very little to do with banking as we understand it. On the other hand, there is no doubt that such institutions provide important services for their customers.

The Functions of Merchant Banking

Merchant banks provide a number of important functions including:

• One of the functions that are most in demand from this type of bank is underwriting. This is where they take responsibility for the stock of a company. They can decide how much stock needs to be created and the price of it when first introduced to the market. The merchant bank can also take over a lot of the responsibility for any documentation related to the stuck launch and for marketing of this stock.
• Portfolio management is also another important service that these banks will offer to their customers. They are in a good position to evaluate any potential investment and to advise their customers as to how best to proceeds.
• Issue management is where the merchant bank helps a business transfer into a public company. They will take charge of all the paperwork and even create a prospectus for the company.

The Benefits of Merchant Banking

The main benefit of merchant banking is that it is so highly specialized. This means that it can really focus on the particular needs of its customers. Not all merchant banks will offer every service associated with this type of enterprise; instead they will often focus on one specific thing. This increases their skill in this area even further and it is why customers will seek them out. Most of the most famous banks in the world will have retail banks and merchants banks because they each provide a vital function for customers and will be in demand.

Merchant bankers may not be as well known to the public as their retail counterpart, but this should not devalue the importance of their work. They provide a great service to businesses and those who have a lot of money to invest – it is hard to imagine how some enterprises would be able to function without such help. They can be in charge of sums of money that some of us will only be able to dream about.

How Does a Jumbo CD Work?

In many ways this type of CD is similar to other types of certificate of deposit. The money used in the investment will be tied up for a predetermined period of time and this is why it can sometimes be referred to as a ‘time deposit’. The time period for this type of investment can vary greatly. It can be as little as 3 months or as much as 6 years. At the end of the period where the money has been tied up the investor will be guaranteed a certain return. This is what makes these investments so appealing – they are low risk and provide reasonable rewards.

The Jumbo CD can be a little riskier than the standard certificate of deposit. The reason for this is that only investments lower than $100,000 will be insured by the FDIC. The fact that these deposits are above this threshold means that they are not covered by this assurance. Comparatively speaking though, it is still a much safer investment than a lot of other options out there.

Why Choose a Jumbo CD?

If you have a large amount of money to invest then a jumbo certificate of deposit can be a good option. It offers a good rate of interest; a lot more than what you would expect to get with savings or other types of account. Of course you will need to be sure that you will be able to leave the money in the account for the agreed upon time. If you want to make the most money from this type of investment you have to be prepared to lose control of this money for a long time. The longer you agree to invest it for the more money you will make on the transaction.

The benefit of choosing a jumbo certificate of deposit over a more traditional certificate of deposit is that you will make more money over the same time period. Investing such a large sum of money is not for everyone though, and a lot of us don’t like to have money tied up in this way. It is possible to cash in a jumbo certificate early but this will mean not going the expected return on the investment.

Jumbo CDs are only one option for people who have a large sum of money that they want to invest. It will not bring as large a return as more riskier ventures, but it is probably better than just keeping money in the bank.

Types of Unearned Income

As well as the money received for unfinished work there are also other ways that people can have unearned incoming including:

• If you have made investments and these return a dividend then this can be classified as unearned income.  This includes foreign exchange deals and profits from shares and commodities. It also includes any interest you have made from your savings or checking account.
• If you own some property and are currently renting it to another individual then this too can be considered unearned income. This type of money can also be referred to as indirect income. The fact that the owner of the property isn’t actually doing something to get the money is why it is referred to as unearned.
• Alimony and other types of support can also be classified as unearned
• Gifts could also fall into this category
• Money obtained as a prize for winning something

These are just some examples of unearned income and there are many more. It is always a good idea to consider any money you get from anywhere other than work as unearned income.

Things to Consider with Unearned Income

Even though this money is unearned it still needs to be declared to the tax people. On the tax form there is actually a category for earned and unearned money. Not only does this money need to be declared but it is usually taxable as well. This tends to be the same amount of tax as you pay on your regular earned income – although this can vary between different jurisdictions. In some countries they can even tax unearned income at a much higher rate because it is felt that the individual did not have to work hard to get it.

Most individuals will usually have at least some unearned income. This might only be something like a bit of interest from a savings account. It is easy to forget about this when it comes to paying taxes, but failing to declare it could lead to problems later on. There are also certain types of unearned income where there won’t be an expectation to pay any tax. Some prizes and awards may be given tax free, but it is important to always be sure about where you stand in regard to tax. The information you need is easy to obtain on the web.