GSF 1025 Lecture : Chapter 10 - The Government in the Economy Taxation and Regulation
Document Summary
Why do governments tax and spend: raise revenues to pay for public goods, redistribute income to address fairness issues, finance operations of government, correct market failures and externalities, redistribute income to address fairness issues (income tax) Government payments to individuals or groups: the tax structure. The rate paid on the last dollar of income. System in which average and marginal tax rates are higher for higher income levels. System in which everyone pays the same proportion of their income in taxes, regardless of how much their income is; i. e. , marginal and average tax rates are the same for everyone. System in which the lower the income, the higher percentage of income is paid in taxes; i. e. , marginal and average tax rates fall as income rises: financing operations. Paying for the day-to-day running of governments: correcting market failures and externalities (tax on producers) Taxes are not usually levied to deal with a specific market failure, as discussed in chapter 9.
