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1、【精品文档】如有侵权，请联系网站删除，仅供学习与交流曼昆经济学原理英文版文案加习题答案12章.精品文档.12THE DESIGN OF THE TAX SYSTEMWHATS NEW IN THE SEVENTH EDITION:All tables have been updated to the most recently available numbers. A new In the News box on “Tax Expenditures has been added.LEARNING OBJECTIVES:By the end of this chapter, students s
2、hould understand: how the U.S. government raises and spends money. the efficiency costs of taxes. alternative ways to judge the equity of a tax system. why studying tax incidence is crucial for evaluating tax equity. the trade-off between efficiency and equity in the design of a tax system.CONTEXT A
3、ND PURPOSE:Chapter 12 is the third chapter in a three-chapter sequence on the economics of the public sector. Chapter 10 addressed externalities. Chapter 11 addressed public goods and common resources. Chapter 12 addresses the tax system. Taxes are inevitable because when the government remedies an
4、externality, provides a public good, or regulates the use of a common resource, it needs tax revenue to perform these functions.The purpose of Chapter 12 is to build on the lessons learned about taxes in previous chapters. We have seen that a tax reduces the quantity sold in a market, that the distr
5、ibution of the burden of a tax depends on the relative elasticities of supply and demand, and that taxes cause deadweight losses. We expand the study of taxes in Chapter 12 by addressing how the U.S. government raises and spends money. The difficulty of making a tax system both efficient and equitab
6、le is then discussed.KEY POINTS: The U.S. government raises revenue using various taxes. The most important taxes for the federal government are individual income taxes and payroll taxes for social insurance. The most important taxes for state and local governments are sales taxes and property taxes
7、. The efficiency of a tax system refers to the costs it imposes on taxpayers. There are two costs of taxes beyond the transfer of resources from the taxpayer to the government. The first is the deadweight loss that arises as taxes alter incentives and distort the allocation of resources. The second
8、is the administrative burden of complying with the tax laws. The equity of a tax system concerns whether the tax burden is distributed fairly among the population. According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government. Accordin
9、g to the ability-to-pay principle, it is fair for people to pay taxes based on their capability to handle the financial burden. When evaluating the equity of a tax system, it is important to remember a lesson from the study of tax incidence: The distribution of tax burdens is not the same as the dis
10、tribution of tax bills. When considering changes in the tax laws, policymakers often face a trade-off between efficiency and equity. Much of the debate over tax policy arises because people give different weights to these two goals.CHAPTER OUTLINE:I.A Financial Overview of the U.S. GovernmentFor thi
11、s material to be relevant, you will want to update it from time to time. Data on government receipts and expenditures can be found easily on the Internet or through the most recent edition of the Economic Report of the President.A.Figure 1 shows the level of government revenue in the United States,
12、including federal, state, and local governments, as a percentage of total income for the U.S. economy.Figure 11.The role of government has grown substantially over the past century.2.The governments revenue from taxation has grown at a faster rate than the economys level of income.B.Table 1 compares
13、 the tax burden for several major countries, as measured by the governments tax revenue as a percentage of the nations total income.Table 11.The United States has a low tax burden compared to most other advanced economies.2.Many European nations have much higher taxes, which finance a more generous
14、social safety net. C.The Federal Government1.Receiptsa.Table 2 reports the receipts of the federal government in 2011.Table 2b.Total receipts were $2,520 billion or $8,077 per person.c.The largest source of revenue is the individual income tax.d.A familys income tax liability is how much it owes in
15、taxes based on income. This tax is not proportional to income. It is based on income minus deductions, and the tax rate rises as income rises. Table 3 presents federal tax rates for 2013.Table 3e.Other important revenue sources include payroll taxes (social insurance taxes), the corporate income tax
16、, and excise taxes.2.Spendinga.Table 4 reports where the federal government spent its budget in 2011.Table 4b.Total spending was $3,757 billion or $12,042 per person.c.The largest category of expenditure is for income security, which includes Social Security, unemployment insurance payments, and wel
17、fare payments. The second largest expense is health programs, including Medicare, Medicaid, and spending on medical research.d.The next largest category of spending is national defense. e.Another important category of expenditure is net interest on the federal debt.3.Definition of budget deficit: an
18、 excess of government spending over government receipts.Activity 1Alphabet Soup: The Role of the GovernmentType:In-class assignmentTopics: The role of governmentMaterials needed: NoneTime: 15 minutesClass limitations: Works in any size class4.Definition of budget surplus: an excess of government rec
19、eipts over government spending.PurposeThis assignment shows that many government activities exist in a market economy. InstructionsAsk the students to list as many government-provided goods and services as possible. They should include activities at the federal, state, and local levels.Then ask them
20、 to list all the “alphabet” agencies (FBI, CIA, USDA, etc.).The most important question to ask is “WHY?” Why, in a predominantly market economy, does the government play so many roles?Common Answers and Points for DiscussionStudents should be able to list dozens of government activities and nearly a
21、s many agencies.The rationale for government action can include: Creating an institutional framework for markets (laws, courts, money, SEC) Addressing market failure (national defense, education, highways, EPA) Addressing monopoly (antitrust, public utilities, FTC) Addressing equity and income distr
22、ibution (Social Security, food stamps) Macroeconomic stability (fiscal policy, monetary policy) Financing the above activities (taxes, bonds, IRS).D.Case Study: The Fiscal Challenge Ahead1.From 2009 to 2012, the U.S. federal government had budget deficits that exceeded $1 trillion every year, the la
23、rgest budget shortfalls since World War II.2.Long-term projections of the governments budget show that this is expected to rise dramatically in the decades ahead.Figure 2a.The population ages 65 and older is growing; thus, Medicare and Social Security expenditures will rise as well.b.In addition, th
24、e costs of Medicare, Medicaid and government-subsidized health insurance are affected by the rising cost of medical care.E.State and Local Government1.ReceiptsTable 5a.Table 5 reports the receipts from state and local governments for 2011.b.Total receipts were $2,064 billion or $6,615 per person.c.T
25、he two most important taxes for state and local governments are sales taxes and property taxes.d.State and local governments also levy individual and corporate income taxes.e.State governments also receive funding from the federal government.2.Spendinga.Table 6 shows how state and local governments
26、spent their budgets in 2011.Table 6b.The largest category of spending was education, while the second largest category was health programs.II.Taxes and EfficiencyA.Well-designed tax policies minimize the deadweight losses that occur when taxes distort incentives. They also minimize the administrativ
27、e burdens that taxpayers face when complying with tax laws.B.Deadweight Losses1.Taxes lead to deadweight losses because they lower total surplus.Provide students with several examples of how taxes lead to an inefficient outcome. Some examples to discuss include an inefficient shifting of productive
28、activity from the market sector to the household sector, diminished saving, and increased leisure.2.Case Study: Should Income or Consumption Be Taxed?a.Because interest income is taxed, the current income tax laws discourage saving.b.If consumption (instead of income) is taxed, this disincentive dis
29、appears.c.European nations tend to rely more on consumption taxes than does the United States.C.Administrative Burden1.The current tax system is quite burdensome because of the large amount of paperwork required both when filling out tax forms and keeping records throughout the year.For most undergr
30、aduate students, this burden may seem somewhat trivial. Use some real-world examples of actual compliance costs to underscore this important aspect of taxation. Use some personal examples if appropriate.2.Many taxpayers spend resources hiring accountants and tax lawyers.a.People often need help fill
31、ing out complex tax forms.b.Individuals may also want to learn how to arrange their affairs to reduce their tax burden.D.Marginal Tax Rates versus Average Tax Rates1.Definition of average tax rate: total taxes paid divided by total income.2.Definition of marginal tax rate: the amount that taxes incr
32、ease from an additional dollar of income.3.The average tax rate measures the sacrifice made by a taxpayer; the marginal tax rate measures how much the tax system distorts incentives.ALTERNATIVE CLASSROOM EXAMPLE:Income = $100,000Tax BracketsTax Rate:$0$20,0000%$20,001$50,000 15%$50,001 +25%Tax liabi
33、lity = (0.15)($30,000) + (0.25)($50,000)= $4,500 + $12,500 = $17,000Average tax rate = $17,000/$100,000 = 17%Marginal tax rate = 25%E.Lump-Sum Taxes1.Definition of lump-sum tax: a tax that is the same amount for every person.2.For this type of tax, the marginal tax rate is equal to zero.3.This is th
34、e most efficient type of tax because it does not distort incentives and thus has no effect on total surplus. There is also little administrative burden with this type of tax.4.However, a lump-sum tax would take the same amount from the poor and the rich, which most people would view as unfair.III.Ta
35、xes and EquityA.The Benefits Principle1.Definition of benefits principle: the idea that people should pay taxes based on the benefits they receive from government services.2.This principle tries to make public goods similar to private goods.3.An example of this would be the tax on gasoline, especial
36、ly if revenues from the tax are used to build or maintain roads.B.The Ability-to-Pay Principle1.Definition of ability-to-pay principle: the idea that taxes should be levied on a person according to how well that person can shoulder the burden.2.Definition of vertical equity: the idea that taxpayers
37、with a greater ability to pay taxes should pay larger amounts.Table 7a.Three tax systems: proportional, regressive, and progressive.b.Definition of proportional tax: a tax for which high-income and low-income taxpayers pay the same fraction of income.c.Definition of regressive tax: a tax for which h
38、igh-income taxpayers pay a smaller fraction of their income than do low-income taxpayers.d.Definition of progressive tax: a tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers.e.Case Study: How the Tax Burden Is Distributed Table 8 shows that the ta
39、x burden in this country is highly progressive. In addition, studies have shown that, if transfer payments are also taken into account, the degree of progressivity is substantial.Table 83.Definition of horizontal equity: the idea that taxpayers with similar abilities to pay taxes should pay the same
40、 amount.C.Tax Incidence and Tax Equity1.The burden of a tax is not always borne by who pays the tax bill.2.Example: tax on fur coats. This will ultimately affect those who sell and produce the fur coats because the quantity of fur coats demanded will fall due to the increase in price.3.Case Study: W
41、ho Pays the Corporate Income Tax?a.The corporate income tax is popular among voters because a corporation is nonhuman and faceless.b.However, the burden of the corporate tax falls on stockholders, customers, and workers.c.An increase in corporate taxes means an increase in the cost of producing the
42、product. Firms will cut back production (which lowers supply and raises the price to the consumer) and possibly lay off workers (which causes unemployment, lower wages, or both).D.In the News: Tax Expenditures1.Eliminating tax expenditures, special tax cuts for things like mortgage interest and char
43、itable giving, could result in lower taxes and fiscal sustainability.2.This article from The New York Times discussing the benefits of eliminating tax expenditures and the politics associated with such a proposal.IV.Conclusion: The Trade-off between Equity and EfficiencyActivity 2Tax AlternativesTyp
44、e:In-class assignmentTopics: Taxes and fairnessMaterials needed: NoneTime: 20 minutesClass limitations: Works in any size classPurposeThe impact of taxes can be examined in a variety of ways. This exercise helps students think about the different effects of taxes on different goods. Taxes that may b
45、e appealing because they minimize deadweight loss may be undesirable for equity reasons.InstructionsTell the class, “The state has decided to increase funding for public education. They are considering four alternative taxes to finance these expenditures. All four taxes would raise the same amount o
46、f revenue.” List these options on the board: 1.A sales tax on food2.A tax on families with school-age children3.A property tax on vacation homes4.A sales tax on jewelryAsk the students to answer the following questions. Give them time to write an answer, then discuss their answers before moving to t
47、he next question:A.Analyze these taxes using the benefits principle.B.Analyze these taxes using the principle of horizontal equity.C.Classify each tax as progressive, proportional, or regressive.D.Which tax would you choose to finance education? Explain.Common Answers and Points for DiscussionA. Are
48、 the taxes related to the benefits received?1.A sales tax on food: This broad-based tax would be appropriate if citizens, as a whole, receive benefits from education. To the extent that education provides positive externalities, this tax could be justified on the benefits principle.2.A tax on families with school-