People are concerned about the size of government and inequities in the distribution of taxes, so this chapter focused on the problems of government size and of tax distributions. After the fears of people were discussed and conclusions were reached that some worries are well-founded and some are not, the problems of government size and tax distributions were approached in the same manner. | Chapter 14 Government Spending, Taxation, and the National Debt: Who Wins and Who Loses? Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 14- What Are People Afraid Of? Size of Government Tax Inequities 14- Total Government Expenditures and Federal Government Expenditures as a Percentage of GDP, 1960-2008 14- Total Government Purchases, Transfer Payments and Interest Paid as a Percentage of GDP, 1960-2008 14- Total Government Receipts and Federal Government Receipts as a Percentage of GDP, 1960-2008 14- Economic Analysis of the Problem of Size An Efficient Level of Government Expenditures Pure Public Goods Nonrival in consumption Nonexclusion External Benefits and Costs Income Distribution Price per unit P P0 PE Q QE DT = MPB D DT S = MPC = MSC Quantity per unit of time MEB D = MPB Click 1: An Efficient Level of Government Click 2: Pure Public Goods Click 3: Nonrival Click 4: Nonexclusion Click 5: External Benefits Click 6: Graph Click 7: Income Distribution 14- Tax Equity Equal tax treatment doctrine – horizontal equity Relative tax treatment doctrine – vertical equity Ability-to-Pay Principle Benefits-Received Principle 14- Tax Efficiency Administrative cost Compliance cost Excess burden 14- Price Elasticity of Demand Quantity per week Price per week P P1 Q DA Q1A Q1B DB 14- Perfectly Price Inelastic Quantity per week Price per week D Q P1 P2 14- Perfectly Price Elastic Quantity per week Price per week D Q 14- Output Tax Quantity per week Price per week D1 Q S1 D2 S2 Pretax equilibrium Post-tax equilibrium Amount of tax per unit Click 1: S2, bracket and Amount of tax per unit, horizontal and vertical dashed lines and Post-tax equilibrium 14- Output Tax Quantity per week Price per week D Q S S1 Pretax equilibrium Post-tax equilibrium Amount of tax per unit Q1 Click 1: S2, long vertical dashed line, bracket, Amount of tax per unit, Post-tax equilibrium, short vertical dashed line, Q1 14- Tax Share in Selected Countries, 2003 Nation Taxes Collected as a Percent of GDP Australia Canada France Germany Italy Japan Spain United Kingdom United States 14- Federal Tax System, 2008 14- Effective Federal Tax Rates by Income Category Effective Federal Tax Rate (%) Income Category 2004 2014 Lowest quintile Second quintile Middle quintile Fourth quintile Highest quintile Overall Top 10 percent Top 5 percent Top 1 percent 14- The Personal Income Tax 2008 Tax Rate Schedules The Debt and the Deficit, 1998-2008 14- The National Debt 14- Economic Analysis of Budget Deficits and Surpluses Economic effects of government borrowing on interest rates Expansionary effect of budget deficits Contractionary effect of budget surpluses Economic Effects of Federal Debt Retirement 14- Recent Tax Reforms The Economic Growth and Taxpayer Relief Reconciliation Act 2001 Rationale for the Bush tax cuts Critique of the Bush tax cuts Job Creation and Worker Assistance Act 2002 Jobs and Growth Tax Relief Act 2003 American Recovery and Reinvestment Act 2008
