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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition

Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition. Chapter 9: The Mixed Economy of the United States. The Mixed Economy: Households. Functional distribution of income, 1998. Source: Federal Reserve Bulletin, April 1999. The Mixed Economy: Households.

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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition

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  1. Contemporary Economics:An Applications ApproachBy Robert J. Carbaugh1st Edition Chapter 9: The Mixed Economy of the United States

  2. The Mixed Economy: Households Functional distribution of income, 1998 Source: Federal Reserve Bulletin, April 1999 Carbaugh, Chap. 9

  3. The Mixed Economy: Households Personal distribution of income Money income before taxes Lowest Second Middle Fourth Top Year 20 percent 20 percent 20 percent 20 percent 20 percent 1935-6 4.1% 9.2% 14.1% 20.9% 51.7% 1950 4.5 12.0 17.4 23.4 42.7 1960 4.8 12.2 17.8 24.0 41.3 1970 5.4 12.2 17.6 23.8 40.9 1980 5.2 11.5 17.5 24.3 41.5 1985 4.7 10.9 16.8 24.1 43.5 1990 4.6 10.8 16.6 23.8 44.3 1996 4.2 10.0 15.8 23.1 46.8 Source: US Dept. of Commerce, Bureau of the Census, Current Population Reports Carbaugh, Chap. 9

  4. The Mixed Economy: Households Households as spenders and savers, 1997 Amount Percent(billions)of total Disposition of household income Personal consumption expenditures $5,674 84% Personal taxes 989 14 Personal savings 121 2 6,784 100 Composition of personal consumption Expenditures Durable goods $673 12% Non-durable goods 1,601 28 Services 3,400 60 5,674 100 Source: Economic Report of the President, 1999 Carbaugh, Chap. 9

  5. The Mixed Economy: Business US business firms in 1995 Number of Business firms (mill.) receipts (bill.) Form of business Number percent Dollars percent Proprietorships 16.4 73% $807 5% Partnerships 1.6 7% 854 6% Corporations 4.5 20% 13,969 89% TOTAL 22.5 100% 15,630 100% Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998 Carbaugh, Chap. 9

  6. The Mixed Economy: Government Growth of total government outlays, 1960-1997 Source: Economic Report of the President, 1999 Carbaugh, Chap. 9

  7. Government Finance Federal government outlays and receipts, 1998 Federal Outlays Federal Receipts Law enforcement & General government 2% Borrowing to cover deficit 1% SocialSecurity, Medicare, Unemployment & other retirement taxes 34% Social programs 18% Social security, Medicare, & other retirement 38% Personal income taxes 46% Net interest on the debt 15% National defense, Veterans, & Foreign affairs 20% Physical, Human & Community Development 7% Corporate income taxes 11% Excise, Customs, Estate, Gift and misc. taxes 8% Source: Economic Report of the President, 1999 Carbaugh, Chap. 9

  8. Government Finance State and local receipts and expenditures, 1996 Receipts Expenditures Sales and Excise taxes 20% Other 29% Other 43% Education 33% Individual income tax 12% Property tax 17% Public welfare 18% Revenue from the Federal Government 19% Corporate income tax 3% Highways 6% Source: Economic Report of the President, 1999 Carbaugh, Chap. 9

  9. Taxation Taxes and tax rates Total tax receipts as a percent of domestic output, 1996 Nation Average tax rate Sweden 55.6% France 47.6 Italy 44.8 Germany 44.1 Canada 37.2 United Kingdom 35.5 United States 31.7 Japan 29.0 Singapore 28.1 Hong Kong 16.1 Carbaugh, Chap. 9

  10. Taxation Progressive, proportional & regressive taxes Total Total Average Marginal income taxes due tax rate tax rate Progressive tax $0 $0 - - 100 5 5% 5% 200 20 10% 15% 300 45 15% 25% Regressive tax $0 $0 - - 100 30 30% 30% 200 50 25% 20% 300 60 20% 10% Proportional tax $0 $0 - - 100 10 10% 10% 200 20 10% 10% 300 30 10% 10% * In a progressive tax system, the average tax rate and marginal tax rate rise as income increases. * In a regressive tax system, the average tax rate and marginal tax rate fall as income increases. * In a proportional tax system, the average tax rate and marginal tax rate remain the same as income increases. Carbaugh, Chap. 9

  11. Taxation Federal income tax rates for a single taxpayer, 1998 Tax bracket Taxes Average Marginal Over Up to due* tax rate tax rate $0 25,350 $3,803 15% 15% 25,350 61,400 13,896 23% 28% 61,400 128,100 34,563 27% 31% 128,100 278,450 88,669 32% 36% 278,450 and over 39.6% * Computed at the top of the four lowest taxable Income brackets. Carbaugh, Chap. 9

  12. Taxation Size of government in selected nations, 1996 Government expenditures as a percentage Nation of domestic output Sweden 64.7% Denmark 61.5 Finland 57.4 France 54.5 Belgium 54.3 Netherlands 49.9 Germany 49.0 Canada 44.7 United Kingdom 41.9 Australia 36.6 Japan 32.0 United States 31.4 South Korea 19.3 Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998 Carbaugh, Chap. 9

  13. Taxation Progressive vs. flat-rate income tax Tax rate 39.6% Progressive tax 36% 31% 28% 20% Flat-rate tax 15% 23,350 56,550 117,950 256,500 Carbaugh, Chap. 9

  14. Taxation Taxes on goods & services as a share of total tax revenue Source: US Dept. of Commerce, Bureau of the Census, Statistical Abstract of the US, 1998 Carbaugh, Chap. 9

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