EC 201 11-26-08 - tax o progressive tax: % of income paid...

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EC 201 11-26-08 Characteristics of “good” tax system (all else equal) o 1. Raise revenue o 2. Low costs of administration +compliance Income tax complicated High compliance costs Payroll tax simple Low compliance costs o 3. Low deadweight loss o 4. “fair” Normative A. horizontal equity –similar taxpayers should pay similar tax o Possible violations of horizontal equity: 1. Non-neutrality of income to marital status “marriage tax” “marriage bonus” 2. Property tax: Michigan since 1994 Cap on assessment for tax purposes If sold, re-assessed to full mkt. value 3. Property taxes in Boston 1960s White neighborhoods assessed at 10% Black neighborhoods assessed at 110% B. vertical equity- higher income people should pay more
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Unformatted text preview: tax o progressive tax: % of income paid in tax as income o proportional tax: % of inc. paid in tax is constant o regressive tax: % of inc. paid in tax as inc. o Individual income tax- labor inc. + capital inc. Michigan: exemption $3400/person Not taxed Tax rate=0 Then flat rate of 4.35% on all taxable inc. above exemption Somewhat progressive over much of income range, because of exemption Federal +many states + other countries income tax o Exemption o graduate marginal tax rates mtr as income payroll tax- on labor earnings no exemptions o flat 15.3% up to ceiling ($102, 000) o 2.9% above ceiling...
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This note was uploaded on 04/19/2011 for the course EC 201 taught by Professor Ballard during the Fall '08 term at University of Michigan.

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EC 201 11-26-08 - tax o progressive tax: % of income paid...

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