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Unformatted text preview: d o Public good: all get same Q , but different people have different willingness to pay WTP o to get social WTP curve, sum individual WTP curves vertically o But nonexclusivity people dont reveal preferences accurately o Must rely on political processes for public goods Must pay for govt. expenditures o Confiscation o Inflation o Debt o (govt. issues bonds interest payments future taxes o **taxes Good characteristic of good tax system (all else equal): 1. Raise revenue 2. Low costs of administration (fed: internal revenue service, state: Mich. Revenue) + compliance (individual taxpayers, tax accountants) US individual income tax has high compliance costs(complicated) o ~5% of revenues o Payroll tax: flat tax on labor earnings, no deductions, low compliance costs...
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