ch10 - Chapter 10 Introduction to Government Finance 1...

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1 Chapter 10 Introduction to Government Finance
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2 Federal, State, and Local Revenue Sources: Taxes: Payroll Income (Corporate and Personal) Property Sales and Excise Estate Tariffs Fees Tuition Licenses $3 trillion annually
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3 Purpose and Consequences of Government Finance Political Equilibrium Market Equilibrium and Its Efficiency The Distribution of Income
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4 Taxes Taxes are compulsory payments to government
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5 Tax Basics Tax Base The item or activity that is to be taxed A general tax is one that taxes all of the components of the economic base, with no exclusions, exemptions, or deductions from the tax base. A selective tax is one that taxes only certain portions of the tax base, or it might allow exemptions and deductions from the general tax base. An excise tax is a selective tax on the manufacture or sale of a particular good or service. Tax Rate Structure The relationship between the amount that is to be paid in tax and the tax base for a given accounting period
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6 Tax Basics (Continued) Marginal Tax Rate The amount by which the tax increases when the tax base increases Base Tax the of Value Paid Taxes Total MTR = Base Tax the of Value Paid Taxes Total ATR = Average Tax Rate The total amount of tax divided by the total amount of the tax base Tax bracket The range of the tax base in which the marginal rate is constant
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7 Descriptors of the Tax Rate Structure A Progressive Tax has a structure where the marginal tax rate is increasing and greater than the average tax rate. A
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This note was uploaded on 10/28/2011 for the course ECON 332 taught by Professor D.hyman during the Spring '11 term at American University of Beirut.

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ch10 - Chapter 10 Introduction to Government Finance 1...

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