Chapter 6 Terms 101 - Paying for the Public Sector The...

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Paying for the Public Sector - The government budget constraint states that the limit on government spending and transfers imposed by the fact that every dollar the government spends, transfers, or uses to repay borrowed funds must ultimately be provided by the taxes it collects. Tax Base is the value of goods, services, wealth, or incomes subject to taxation. The government then sets a tax rate that is the proportion of a tax base that must be paid to government as taxes. Average Tax Rate is defined as the total tax payment divided by total income. It is the proportion of total income paid in taxes. Marginal Tax Rate is defined as the change in the tax payment divided by the change in income, or the percent of additional dollars of income that must be paid in taxes. Progressive Taxation: A tax system in which as one earns more income, a higher percentage of the additional dollars is taxed. The marginal tax rate exceeds the average tax rate and both rise as income rises. Proportional Taxation:
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This note was uploaded on 06/06/2011 for the course ECON 101 taught by Professor Dsliva during the Fall '11 term at Moraine Valley Community College.

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Chapter 6 Terms 101 - Paying for the Public Sector The...

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