Cost of Taxation (Chapter 5)

a mandatory payment collected individuals and corporations by a government entity to fund government activities

drives a wedge between the price that buyers pay and the price sellers receive

raises the price buyers pay, lowers the price sellers receive, reduces the quantity bought and sold

give the 5 principles of taxation

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holds that people with more income should pay more taxes

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is one that takes a higher percentage of income as income falls (e.g., taxes on cigarettes)

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is one that takes a fixed percentage of income

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in, proportional tax, what happens to total taxes as income increases

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is one that takes a higher percentage of income as income rises

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an alternative criterion for establishing a tax structure is the benefits received principle, which holds that a tax should be based on the benefits received from the government services funded by the tax

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give the 4 primary types of taxes

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are imposed on the income earned by a person or firm

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taxes imposed in assets

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taxes imposed on the value of goods sold

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taxes imposed as a percentage of firms’ sales and are generally imposed on retail sales

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taxes imposed on specific goods or services

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justified as a way of discouraging the consumption of demerit good, such as cigarettes and alcoholic beverages

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a kind of benefits-received tax

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a type of economic analysis that seeks to determine where the actual burden of a tax rests

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the tax rate that applies to an additional dollar of income earned

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the study of government expenditure and tax policy and of their impact on the economy

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include all spending by government agencies

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include all funds received by government agencies

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the primary component of government revenues

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purchases happen when a government agency purchases or produces a good or a service

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payments made by government agencies to individuals in the form of grants rather than in return for labor or other services

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occurs when a government’s revenues equal its expenditures for a particular period

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represent government expenditures but not government purchase

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occurs if a government’s revenues exceed its expenditures

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exists if government expenditures exceed revenues

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• The benefit received by buyers in a market is measured by

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• The benefit received by sellers in a market is measured by

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is the income that collected by governments through taxation

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is the sum of consumer, produce surplus, and tax revenue

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it’s the area between the supply and demand curves up to the equilibrium quantity

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the fall in total surplus that results when a tax (or some other policy) distorts a market outcome

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Cost of Taxation (Chapter 5)

Questions and Answers

a mandatory payment collected individuals and corporations by a government entity to fund government activities

drives a wedge between the price that buyers pay and the price sellers receive

raises the price buyers pay, lowers the price sellers receive, reduces the quantity bought and sold

give the 5 principles of taxation

holds that people with more income should pay more taxes

is one that takes a higher percentage of income as income falls (e.g., taxes on cigarettes)

is one that takes a fixed percentage of income

in, proportional tax, what happens to total taxes as income increases

is one that takes a higher percentage of income as income rises

an alternative criterion for establishing a tax structure is the benefits received principle, which holds that a tax should be based on the benefits received from the government services funded by the tax

give the 4 primary types of taxes

are imposed on the income earned by a person or firm

taxes imposed in assets

taxes imposed on the value of goods sold

taxes imposed as a percentage of firms’ sales and are generally imposed on retail sales

taxes imposed on specific goods or services

justified as a way of discouraging the consumption of demerit good, such as cigarettes and alcoholic beverages

a kind of benefits-received tax

a type of economic analysis that seeks to determine where the actual burden of a tax rests

the tax rate that applies to an additional dollar of income earned

the study of government expenditure and tax policy and of their impact on the economy

include all spending by government agencies

include all funds received by government agencies

the primary component of government revenues

purchases happen when a government agency purchases or produces a good or a service

payments made by government agencies to individuals in the form of grants rather than in return for labor or other services

occurs when a government’s revenues equal its expenditures for a particular period

represent government expenditures but not government purchase

occurs if a government’s revenues exceed its expenditures

exists if government expenditures exceed revenues

• The benefit received by buyers in a market is measured by

• The benefit received by sellers in a market is measured by

is the income that collected by governments through taxation

is the sum of consumer, produce surplus, and tax revenue

it’s the area between the supply and demand curves up to the equilibrium quantity

the fall in total surplus that results when a tax (or some other policy) distorts a market outcome

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