1 / 13

Public Goods & Taxes

Public Goods & Taxes. Chapter 11. Public vs. Private Goods. Public Goods Goods that are neither excludable nor rival in consumption Private Goods Goods that are both excludable & rival in consumption. Excludable- consumer who can not pay are excluded.

Download Presentation

Public Goods & Taxes

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Public Goods & Taxes Chapter 11

  2. Public vs. Private Goods • Public Goods • Goods that are neitherexcludable nor rival in consumption • Private Goods • Goods that are bothexcludable & rival in consumption Excludable-consumer who can not pay are excluded Rival-consumption by one reduces quantity for others Public Goods examples: clean air, police protection, radio signals, national defense Private Goods: Food, Coffee, airline tickets, automobiles, etc…

  3. Problems with Public Goods • Free-rider-a person who receives the benefit of a good but avoids paying for it • Examples: • “Slacker” in group work at school • Volunteer for neighborhood cleanup • Fundraising for Fire Department

  4. Public Good Efficiency • When goods are available free of charge => market forces will not allocate resources efficiently • Government should collect taxes & provide public goods wheneverTotal Benefits≥Total Costs • Examples: • National Defense • Basic Research • Fighting Poverty • Fireworks on 4th of July

  5. Tragedy of the Commons • Common Resources – “commonly” owned resources • rival in consumption but non-excludable • Example: fish in ocean, the environment • Tragedy of the Commons-the absence of incentives to prevent “overuse” & depletion of a common resource

  6. . .

  7. Tragedy of the Commons Reading

  8. Types of Taxes • Progressive Tax- • Income ↑ => Average Tax Rate ↑ • Example:U.S. Federal Income Tax • Regressive Tax- • Income ↑ => Average Tax Rate ↓ • Example:Gasoline Tax, Bridge Tax • Proportional Tax • Income ↑ or ↓ => Average Tax Rate stays the same • Example: Flat Income Tax, Corporate Taxes • Excise Tax • Flat fee per unit, paid at purchase • Example: Cigarettes, Gasoline(both are also regressive in tax incidence) Tax Incidence: Who Pays?

  9. } Tax Brackets Progressive Income Tax Example: If you Earn $100,000 ($ 7,000   -   0 )  x 10%    = $700 (28,400   -   7,000 )  x 15% = 3,210 (68,800   -   28,400 )  x .25 % = 10,100 (100,000   -   68,800 )  x .28% = 8,736 Total:   $ 22,746 Actual Tax Rate: 22.7%

  10. Top 1% pay more taxes but The income Gap has widened last 30-Years

  11. EQUAL % tax cuts What best stimulates economic growth?

  12. Practice Test: Public Goods

More Related