Tax Education - Hometwon Page 2. How to develop a fair and equitable tax policy?  
 Tax Education: Hometown Page 2

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Hometown (continued)

Underlying Assumptions

If you wish to estimate income numbers other than those provided in the demographic information, please assume the following:

  1. Deductions FOR AGI are immaterial for everyone in the city.
  2. The current personal exemption, and standard deductions are valid.
  3. Itemized deductions are, on average, 20% of taxable income.
  4. The state income tax is deductible and the sales tax is not.
  5. All children are legitimate dependents.
  6. All returns reflect dividends, sole proprietorship, partnership, and wage and salary income.
  7. Assume all children are living at home.
  8. Federal Tax laws of the United States are applicable.
  9. The average water and sewer charges in Hometown are $70 every two months.
  10. Sales Tax applies to all transactions at the retail level.
  11. Hometown does not currently have a property tax imposed.
  12. There is no welfare system available from either state or federal sources.
  13. Average rent for apartments and duplexes in Hometown depend on the ward the apartment or duplex is located in.
  14. Assume that mortgage payments for single family homes are approximately 9% of the market value.
  15. Assume that Hometown's problems will be under control given the solutions outlined by the police chief, superintendent of schools, and the fire chief. Do not assume the problems will increase over time.
  16. City governments may not engage in arbitrage actions with regard to municipal bonds. Only the amount of money necessary to pay for expected expenses can be borrowed.

Demographic data for Hometown is available and can be accessed by clicking here.

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