SIMON FRASER ECON290 Lecture Notes - Income Taxation

SIMON FRASER ECON290 Lecture Notes - Income Taxation -...

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Income Taxation (chapter 13) 1. Comprehensive Income: The Haig – Simons Definition Comprehensive income is defined as the annual accretion of purchasing power. Definition of comprehensive income in terms of its uses: Income is the sum of a person’s consumption expenditures and the increment in the net worth in a given year. I = C + ΔNW. Definition of comprehensive income in terms of its sources: Three major sources of personal income: earnings from sale of productive services, transfer payments received, and capital gains on assets currently held. Uses = consumption + gifts and donations + saving – cost of acquiring income Sources = earnings + transfers + net capital gains – cost of acquiring income Problems of measurement: (1) measuring the value of income in-kind and other non-market transactions (2) measuring the unrealized capital gains (3) determining what constitutes a cost of earning income 2. Taxation of Labor Earnings Worker’s budget constraint without wage tax: wL + M = wT L is the leisure hours, w is the market wage rate, M is the consumption of all
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SIMON FRASER ECON290 Lecture Notes - Income Taxation -...

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