Presentation12

Presentation12 - Introductiontomicroeconomics...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Introduction to microeconomics Monday, September 21, 2009
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Two principles : According to the  benefits principle  of tax fairness,  those who benefit from public spending should bear the  burden of the tax that pays for that spending. According to the  ability-to-pay principle  of tax  fairness, those with greater ability to pay a tax should  pay more tax. lump-sum tax  is the same for everyone, regardless  of any actions people take.
Background image of page 2
The fairest taxes, in terms of the ability-to-pay  principle, distort incentives the most and perform  badly on efficiency grounds.  In a well-designed tax system, there is a  trade-off  between equity and efficiency : the system can  be made more efficient only by making it less fair,  and vice versa.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Federal Tax Philosophy What is the principle underlying the federal tax  system? It depends on the tax: Income tax accounts for about half of all federal revenue.  The structure of the income tax reflects the ability-to-pay  principle: families with low incomes pay little or no income  tax. In fact, some families pay negative income tax. The second most important federal tax is  FICA (social  security and disability).
Background image of page 4
Federal Tax Philosophy
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Mean household income  is the average income across all households. Median household income  is the income of the household lying at the  exact middle of the income distribution.
Background image of page 6
The  tax base  is the measure or value, such as  income or property value, that determines how much  tax an individual or firm pays. The  tax structure  specifies how the tax depends on  the tax base. Once the tax base has been defined, the next  question is how the tax depends on the base. The  simplest tax structure is a  proportional tax ,   also  sometimes called a  flat tax,  which is the same  percentage of the base regardless of the taxpayer’s  income or wealth.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Some important taxes and their tax bases are as follows: Income tax : a tax that depends on the income of an  individual or a family from wages and investments Payroll tax : a tax that depends on the earnings an  employer pays to an employee Sales tax : a tax that depends on the value of goods sold  (also known as an excise tax) Profits tax
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 24

Presentation12 - Introductiontomicroeconomics...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online