In this chapter, you will learn to solve these economic puzzles: How does the tax burden of the United States compare to other countries? Should we replace the income tax with a national sales tax or a flat tax? How does the Social Security tax favor the upper-income worker?. | Chapter 22 The Public Sector Key Concepts Summary Practice Quiz Internet Exercises ©2000 South-Western College Publishing * In this chapter, you will learn to solve these economic puzzles: Is a flat tax fair? How does the Social Security tax favor the upper-income worker? How does the tax burden of the United States compare to other countries? Should we replace the income tax with a national sales tax or a flat tax? * What is the purpose of this chapter? To examine public-sector decisions of politicians, government bureaucrats, voters, and special interest groups * What has happened to the size of Government? Since the 1950’s, government expenditures have grown from about one-quarter to over one third of GDP * 35 40 45 50 55 60 65 70 75 80 85 90 95 Year 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Total government expenditures Federal government expenditures State & Local Gov. Expenditures 00 Government Expenditures 1935 - 1998 * * * * * * * How do taxes in the . compare to taxes in other countries? . citizens are among the most lightly taxed people in the industrialized world * * 00 35 40 45 50 55 60 65 70 75 80 85 90 95 Year 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Total government taxes Federal government taxes Growth in Taxes in the ., 1935 - 1998 State & Local Gov. Taxes * How does the Government decide which tax is appropriate? Benefits received Ability to pay * What is the Benefits Received Principle? The concept that those who benefit from government expenditures should pay the taxes that finance their benefits * What is the Ability to Pay Principle? The concept that those who have higher incomes can afford to pay a greater proportion of their income in taxes, regardless of the benefits * Which principle dominates in the The ability-to-pay principle dominates the benefits-received principle * What is a Progressive Tax? A tax that charges a higher percentage of income as income . | Chapter 22 The Public Sector Key Concepts Summary Practice Quiz Internet Exercises ©2000 South-Western College Publishing * In this chapter, you will learn to solve these economic puzzles: Is a flat tax fair? How does the Social Security tax favor the upper-income worker? How does the tax burden of the United States compare to other countries? Should we replace the income tax with a national sales tax or a flat tax? * What is the purpose of this chapter? To examine public-sector decisions of politicians, government bureaucrats, voters, and special interest groups * What has happened to the size of Government? Since the 1950’s, government expenditures have grown from about one-quarter to over one third of GDP * 35 40 45 50 55 60 65 70 75 80 85 90 95 Year 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Total government expenditures Federal government expenditures State & Local Gov. Expenditures 00 Government Expenditures 1935 - 1998 * * * * * * * How
