ECON 1000 Lecture Notes - Lecture 19: Proportional Tax, Tax Expenditure, Deadweight Loss
27 Feb 2016
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Document Summary
Ch 12: the design of the tax system. Provide other goods and services required by citizens. Two objectives in designing a tax system are efficiency and equity. An efficient tax system is one that imposes small deadweight loss and small administrative burden. Well designed tax policy tries to avoid or, at least minimize: the deadweight loss that results when taxes distort the decisions that people make, the administrative burdens that taxpayers bear as they comply with the tax law. Average tax rates: total taxes paid divided by total income (measures the sacrifice a taxpayer makes and the degree of progressivity/regressivity of the tax. Marginal tax rates: the extra taxes paid on an additional dollar of income ( determines the deadweight loss of an income tax) Is the most efficient tax; a persons decisions do not alter the amount owed. No deadweight loss/ does not distort incentives.
