Feb 26 - Tax Policy Spring 2008

Feb 26 - Tax Policy Spring 2008 - Tax Policy: Battling the...

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Tax Policy: Battling the Special Interests
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Criteria for a Good(?) Tax System 1) Equity —questions the existence of a large number of preferential exemptions or exemptions a fair tax is first one that treats equally people in equal economic circumstances (distribution that adheres to this reflects horizontal equity a fair tax should also treat unequals unequally (distribution that adheres to this reflects vertical equity)
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Criteria for a Good(?) Tax System 2) Efficiency economic efficiency concerns the effect the tax has on the private sector —does it disturb the relative price of private goods, the pattern of consumption and saving, and the pattern of leisure administrative efficiency concerns how easy the tax is to collect
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Criteria for a Good(?) Tax System 3. Simplicity—the cost of compliance to the taxpayer should not be overlooked 4. Transparency—one that taxpayers are able to understand 5. Administer—allows the government to collect taxes easily and cost-effectively 6. Tax overlapping—recognize that in a federal system, 2 or more levels of government use the same tax base; need to coordinate taxing efforts at one level of government with those at the other level(s)
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Progressive Taxes Require those with higher incomes to pay higher taxes and vice versa. This assumes that higher taxes for high-income groups will be less of a burden than for lower-income groups. This is also called the marginal utility theory. The federal individual income tax operates under progressive tax law.
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Take a larger share of the income of lower-income people . Social Security taxes are an example
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This note was uploaded on 11/21/2009 for the course PPD 225 taught by Professor Lewis during the Spring '07 term at USC.

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Feb 26 - Tax Policy Spring 2008 - Tax Policy: Battling the...

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