1 / 16

What did you study last time?

What did you study last time?. Public goods Common resources. Do you know …. the criteria of an efficient tax system? how to evaluate some tax systems? the principles used to achieve equity in a tax system?. 1. What is an efficient tax system?.

eliot
Download Presentation

What did you study last time?

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. CRC Microeconomics

  2. What did you study last time? • Public goods • Common resources CRC Microeconomics

  3. Do you know … • the criteria of an efficient tax system? • how to evaluate some tax systems? • the principles used to achieve equity in a tax system? CRC Microeconomics

  4. 1. What is an efficient tax system? • An efficient tax system is one that imposes the smallest DWL and administrative burden possible. • Costs of taxes to taxpayers = The tax payment itself + DWL + Administrative burden CRC Microeconomics

  5. 1. What is an efficient tax system? • DWL • The reduction of the economic well-being of taxpayers in excess of the amount of revenue raised by the government. • Because taxes distort incentives, they entail DWL. CRC Microeconomics

  6. 1. What is an efficient tax system? • Administrative burden • Another DWL, referring to the fact that taxpayers lose additional time and money documenting, computing, and avoiding taxes over and above the actual taxes they pay. • The solution, simplification of the tax laws, is politically difficult. CRC Microeconomics

  7. 2. How to evaluate some tax systems? • Tax rates: Average tax rate (atr) and marginal tax rate (mtr) • Regressive, proportional, and progressive tax systems • Lump sum tax system • Flat tax system CRC Microeconomics

  8. a. Tax rates • Average tax rate (atr) - total taxes divided by total income (T/Y) • Marginal tax rate (mtr) - the extra taxes paid on an additional dollar of income (DT / DY) - mtr determines the DWL of an income tax system CRC Microeconomics

  9. b. Regressive, proportional, and progressive tax systems • As income rises, atr and mtr become: - lower in a regressive tax system; - unchanged in a proportional tax system; - higher in a progressive tax system. • Falling mtr => more efficient CRC Microeconomics

  10. c. Lump sum tax system • A tax system in which people pay the same amount of tax. • Lump sum tax = the same tax amount for every person. • atr falls as income rises. • mtr = 0, i.e. DWL = 0 • The most efficient tax system. CRC Microeconomics

  11. d. Flat tax system • A tax system in which people pay the same tax rate. • Flat tax = the single, low tax rate, e.g. 19%, applies for all income levels in the economy. • atr = mtr = constant as in proportional tax system. CRC Microeconomics

  12. 3. What are the principles used to achieve equity in a tax system? a. The benefit principle People should pay taxes based on the benefits they receive from government services, e.g. gasoline tax, etc. CRC Microeconomics

  13. 3. What are the principles used to achieve equity in a tax system? b. The ability-to-pay principle Taxes should be levied on a person according to how well that person can shoulder the burden. (1)Vertical equity - Taxpayers with a greater ability to pay taxes should pay a larger amount. (2) Horizontal equity - Taxpayers with similar abilities to pay taxes should pay the same amount. CRC Microeconomics

  14. Now you know … • the criteria of an efficient tax system. • how to evaluate some tax systems. • the principles used to achieve equity in a tax system. CRC Microeconomics

  15. What will you study next? • How to calculate profits • How to determine revenue • How to measure output/production • How to assess costs • How to maximize profits CRC Microeconomics

  16. See You! Take Care! CRC Microeconomics

More Related