Mankiw Economics paper 2

Mankiw Economics paper 2 - Principles of Microeconomics...

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Principles of Microeconomics Paper Two When the government provides a good or service, it can regulate economic well being. As with any program, funding is essential for the success of the goal. The government raises revenue for its programs through taxation, a topic thoroughly discussed in chapter twelve. Mankiw states that taxes are inevitable because we as citizens expect the government to provide us with various goods and services. However, government revenue through taxation should impose as small as a cost on society as possible. The burden created by this revenue should be equally distributed. Creating efficient and equitable taxes are a goal that governments should fulfill and most strive to do. When considering changes in tax laws, policymakers often face a trade-off between efficiency and equity. Much debate arises over the weights given to these two different goals. Chapter twelve opens its discussion through an analysis of the United States government’s financial overview. Figure one on page 243 shows the United States total revenue from taxes as a percentage of total income for the U.S. Economy. Government input has substantially increased over the past one hundred years. In the early nineteen hundreds, up to about nineteen thirty, total government revenues made up between seven and eleven percent of the total income brought in by the United States government. Recently, from about the nineteen nineties to present day, total government revenues make up about thirty percent of total income brought in by the United States government. As suggested by the evidence from the graph, the government’s role in society is increasing substantially. The United States government is in the middle of the pack when comparing central governments tax revenue as a percentage of gross domestic product (GDP). The tax burden in the U.S. is greater than that of poorer countries such as India and Pakistan but is low when comparing it to European countries such as France, Germany, and England. This information is displayed in table one on page 243. This data suggests that as a country gets richer, the government generally takes a larger share of income through tax revenue. This statement runs pretty consistent when comparing the countries at the top of the chart with countries from the bottom of the chart with the countries in the middle of the chart. However, to completely understand total government revenues, one must break down total finances into catergories. The federal government is one branch of the government that brings in revenue. The federal government is responsible for most of the tax revenue collected in our society. Mankiw said it best “The U.S. federal government raises money in a number of ways, and it finds even more ways to spend it. Receipts are just one way in which they create revenue. An example of income from receipts is represented in table two on page 244. Table two shows the receipts of the federal government in 2004. The federal government collected 1,880 billion dollars in receipts. If you look at the chart, you can see that individual income taxes and social insurance
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This note was uploaded on 04/18/2008 for the course ECON 100 taught by Professor Roche during the Spring '08 term at St. John Fisher College.

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Mankiw Economics paper 2 - Principles of Microeconomics...

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