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LUXURY TAX: A tax on relatively expensive goods that are typically purchased primarily by the wealthy or affluent. A luxury tax is generally set up as an excise tax on the purchase price of a good over an specific amount. For example, a 10% tax on the purchase price of an automobile over $30,000 would be considered a luxury tax. Goods most likely subject to luxury taxies are (expensive) cars, jewelry, boats, planes, and furs. A luxury tax is, by design, a progressive tax that falls more heavily on those with more income. Like almost every tax, a luxury tax is controversial and debated, favored by those not paying and opposed by those paying.

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INCOME EARNED BUT NOT RECEIVED:

The three types of income earned but not received (IEBNR) by the factors of production are Social Security taxes, corporate profits taxes, and undistributed corporate profits. IEBNR is subtracted from national income to calculate personal income.
Income earned but not received (IEBNR) is income that factors of production have rightfully "earned" by contributing to the production of gross domestic product. However, because this income is not paid to the factors, it is not income received by the household sector.
  • Social Security Taxes: Social Security taxes are "contributions" to the Social Security system made by labor. The Social Security system is set up to transfer income earned by labor to the elderly and disabled. In principle, employees "contribute" about 7 percent on the first $60,000 (or so) of their wages (the F.I.C.A. deduction). Employers then match this contribution. In reality, the entire 14 percent is income earned by the employee. Social Security taxes are wages earned, but not received.

  • Corporate Profits Taxes: Corporate profits are earned by corporate shareholders through their ownerships of capital, land, and entrepreneurship. Corporate profits taxes are taxes on these corporate profits that are independent of any income taxes paid by individual shareholders. Corporate profits taxes are thus a portion of corporate profits that are not available for dividend payments to the household sector. Corporate profits taxes are profits earned, but not received.

  • Undistributed Corporate Profits: Undistributed corporate profits are another portion of the corporate profits that are not paid to the household sector. Commonly termed retained earnings, these are profits that could be paid out as dividends, but are usually retained to finance capital investment projects. Undistributed corporate profits are also profits earned, but not received.

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Recommended Citation:

INCOME EARNED BUT NOT RECEIVED, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 21, 2024].


Check Out These Related Terms...

     | personal income and national income | income received but not earned | transfer payments | corporate profits distribution | factor payments | net domestic product | national income | disposable income | gross domestic income | personal taxes and nontax payments |


Or For A Little Background...

     | personal income | gross domestic product, income | circular flow | gross domestic product | National Income and Product Accounts | Bureau of Economic Analysis | National Bureau of Economic Research |


And For Further Study...

     | disposable income and personal income | gross domestic product, expenditures | gross domestic product, ins and outs | gross domestic product, welfare | business cycles | gross national product | real gross domestic product | national income and gross domestic product | national income and net domestic product |


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     | Bureau of Economic Analysis |


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The portion of aggregate output U.S. citizens pay in taxes (30%) is less than the other six leading industrialized nations -- Britain, Canada, France, Germany, Italy, or Japan.
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