economics 9
DESCRIPTION
TRANSCRIPT
![Page 1: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/1.jpg)
Chapter 9:Chapter 9:Sources of Government Sources of Government
RevenueRevenue
Chapter 9:Chapter 9:Sources of Government Sources of Government
RevenueRevenue
![Page 2: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/2.jpg)
9-1: The Economics of Taxation
• Economic Impact of Taxes– Resource allocation – when taxes are
raised on a product, consumers buy less, manufacturers produce less, and resources will have to go to other industries to be employed
– Behavior adjustment - taxes can be used to encourage or discourage certain types of activities
– By changing incentives to save, invest and work, taxes affect productivity and growth
![Page 3: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/3.jpg)
• Criteria for Effective Taxes– Equity - fair– Simplicity – easy to understand– Efficiency – benefits outweigh costs
• Two Principles of Taxation:– Benefit Principle – belief that taxes should be paid
based on benefits received, regardless of income– Ability to Pay Principle – belief that taxes should be
paid according to the level of income, regardless of benefits received
![Page 4: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/4.jpg)
Three Types of Taxes1. Proportional Tax – as income goes up, the percentage of income paid in taxes stays the same2, Progressive Tax – as income goes up, the percentage of income paid in taxes goes up3. Regressive Tax - as income goes up, the percentage of income paid in taxes goes down
![Page 5: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/5.jpg)
9-2: Federal, State, and Local Revenue Systems
Federal Government Revenue Sources (in order of size)1. Individual Income Taxes
– collected with a payroll withholding system that automatically deducts income taxes from paychecks2. FICA Taxes - Federal Insurance Contributions Act
- tax levied on employers and employees to support Social Security and Medicare- also automatically deducted from paycheck
3. Borrowing4. Corporate Income Taxes5. Excise Taxes – tax on manufacture or sell of selected items such as gasoline and liquor
![Page 6: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/6.jpg)
6. Estate and Gift Taxes7. Customs Duties8. Miscellaneous Fees
![Page 7: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/7.jpg)
![Page 8: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/8.jpg)
State Government Revenue Sources (in order of size)1. Intergovernmental Revenues
– funds collected by one level of government that is distributed to another level of government for
expenditures2. Sales Taxes
- general tax levied on consumer goods- 5 states do not have a general sales tax
3. Individual Income Taxes- only 7 states do not rely on individual income
taxes for revenue- varies widely from state to state
4. Other Revenues- interest earnings- tuition and fees- corporate income taxes
![Page 9: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/9.jpg)
Local Government Revenue Sources (in order of size)1. Intergovernmental Revenues2. Property Taxes
- tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, bonds and bank accounts3. Utility Revenues
- public utility companies that supply water, electricity, sewer, and sometimes telecommunications are often owned by local governments4. Sales Taxes5. Other Revenue Sources
- interest earnings- fees- borrowing
![Page 10: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/10.jpg)
![Page 11: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/11.jpg)
![Page 12: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/12.jpg)
9-3: Current Tax Issues and Reforms
• Current Tax Code is incredibly complex
• Tax Reform: 1981– Economic Recovery Tax Act included large tax
deductions for individuals and businesses, accelerated depreciation, and investment tax credits
• Tax Reform: 1986• Tax Reform: 1993• Tax Reform: 1997• Tax Reform: 2001• Tax Reform: 2003• Permanent tax cuts by 2011?
![Page 13: Economics 9](https://reader033.vdocument.in/reader033/viewer/2022061222/54c24e6c4a7959bb2c8b4573/html5/thumbnails/13.jpg)
Alternative Tax Approaches
• Flat Tax – a proportional tax on individual income– Simple– Closes “loopholes”– Save $$ and time preparing tax returns– Removes incentives in current tax code
• Value-Added Tax – Tax consumption, not income– Equivalent to a national sales tax– Tax on the value added at every stage of the
production process