Unformatted text preview: split the check, anything
you order is going to be cheap
indeed. What’s the lobster cost
now? Dessert? I’ll have 15.
In politics, almost everyone has
an incentive to order big off the government menu. Yet, if everyone has
an incentive to order big, and does
order big, the total spending bill is
going to be huge.
ABOUT IT Why do you think people sometimes agree
to split the check evenly rather than
deciding that each individual will
pay his or her exact share? Does
splitting the check lead to a higher
total? Section 2 The Budget: Deficits and Debt 381 14 (364-389) EMC Chap 14 11/18/05 10:59 AM Page 382 Ability-to-Pay Principle President Bush
confers with members of his cabinet
regarding the budget.
The president is obligated to submit his
budget recommendations to Congress
on or before the first
Monday in February
each year. What Is a Fair Share?
Most people say that it is only right for
everyone to pay his or her fair share of taxes.
The problem is, how do we decide what a
fair share is? And who decides? Historically,
two principles of taxation touch on this
issue: the benefits-received principle and the
ability-to-pay principle. Benefits-Received Principle
The benefits-received principle holds that
a person should pay in taxes an amount
equal to the benefits he or she receives from
government expenditures. For example, if
you drive often on government-provided
roads and highways, you ought to pay for the
upkeep of the roads. This goal is usually met
through the excise tax on gasoline. People
who drive a lot buy a lot of gas, so they pay
more in gas taxes than people who drive
very little. Because gas tax revenues are used
for the upkeep of the roads, the major users
of the roads end up paying the bulk of road
382 Chapter 14 Taxing and Spending With some government-provided goods, it
is easy to figure out roughly how much someone benefits. For instance, in the roads-andhighways example, we can assume that the
more a person drives on the road or highway,
the more benefit he or she obtains from it.
With other government-provided goods,
however, it is not as easy to relate benefits
received to taxes paid. For example, we could
say that almost all Americans benefit from
national defense, but we would have a hard
time figuring out how much one person benefits compared to another person. Does
Jackson, down the street, benefit more than,
less than, or the same as Paul, who lives up the
street? The benefits-received principle is hard
to implement in such cases.
Often, the ability-to-pay principle is used
instead. This principle says that people should
pay taxes according to their abilities to pay.
Because a rich person is more able to pay taxes
than a poor person, a rich person should pay
more taxes than a poor person. For example, a
millionaire might pay $330,000 a year in
income taxes, whereas a person who earns
$50,000 a year might pay $8,000. he federal income tax came into existence
in 1913. In that year, the top tax rate th...
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This document was uploaded on 01/16/2014.
- Winter '14