CH6_ECON2301 - Macroeconomics ECON 2301 Spring 2009 Marilyn...

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Macroeconomics ECON 2301 Spring 2009 Marilyn Spencer, Ph.D. Professor of Economics Chapter 6
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Extra Credit Opportunity #4 Extra Credit Opportunity #4 Watch a recording, read a transcript, or read a news story, of Treasury Secretary Geithner’s new bank bailout plan. Summarize the most important parts, in 50- 100 words (needn’t be in complete sentences). Email this summary to me by Thurs., Feb. 26 at marilyn.spencer@tamucc.edu , for up to 4 points of extra credit.
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Extra Credit Opportunity #5 Extra Credit Opportunity #5 Read a thorough news article that explains the provisions of the stimulus bill that President Obama just signed. Summarize the most important parts, in 100-150 words (needn’t be in complete sentences). Email this summary to me by Thurs., Feb. 26 at marilyn.spencer@tamucc.edu , for up to 4 points of extra credit.
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Chapter 6: Funding the Public Sector
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Learning Objectives 1. Distinguish between average tax rates and marginal tax rates 2. Explain the structure of the U.S. income tax system 3. Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect
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Learning Objectives (cont'd) 4. Explain how the taxes governments levy on purchases of goods and services affect market prices and equilibrium quantities 5. Understand how the Social Security system works and explain the nature of the problems it poses for today’s students
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Paying for the Public Sector Three sources of government funding: 1. Fees, or user charges 2. Taxes 3. Borrowing
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Paying for the Public Sector (cont'd) Government Budget Constraint The limit on government spending and transfer payments Imposed by the fact that every dollar spent must be provided for by taxes, fees, debt and/or printing money* *States and local governments are limited to taxes, fees and debt.
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Systems of Taxation (starting with definitions) Tax Base The value of goods, services, wealth, or incomes subject to taxation Tax Rate The proportion of a tax base that must be paid to a government as taxes
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Marginal tax rate = Change in taxes due Change in taxable income Systems of Taxation (cont'd) Marginal Tax Rate The change in the tax payment divided by the change in income
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Systems of Taxation (cont'd) Tax Bracket A specified interval of income to which a specific and unique marginal tax rate is applied Average Tax Rate The total tax payment divided by total income
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Systems of Taxation (cont'd) Proportional Taxation A tax system in which, regardless of an individual’s income, the tax bill comprises exactly the same proportion Marginal tax rate = Average tax rate Income Rate Tax liability $10,000 20% $2,000 $100,000 20% $20,000
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Systems of Taxation (cont'd) Progressive Taxation (as with our income tax system) A tax system in which, as income increases, a higher percentage of the additional income is paid as taxes Marginal tax rate > Average tax rate Income Rate Tax liability $0–$10,000 5% $500 $10,001–$20,000 10% $1,000 $20,001–$30,000 30% $3,000 $4,500
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This note was uploaded on 03/27/2012 for the course ECON 2301 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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CH6_ECON2301 - Macroeconomics ECON 2301 Spring 2009 Marilyn...

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