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https://quizlet.com/_47wu6y

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https://docs.google.com/document/d/1_IFB5m5HrTX_XRpWQVx4ocjUQtbchqgkfQxPMDhCwkc/edit

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fix externalities
provide public goods
regulate the use of common goods

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2/3 of all taxes

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Sources of Revenue
1. individual income tax
2. payroll tax / social insurance tax
3. corporate income tax

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Expenditures
1. social security (transfer payments too) [1/4 of all spending]
2. national defense
3. Medicare

income security = payments to poor families

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deficit, surplus, balanced

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1/3 of all taxes

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Sources of Revenue
1. sales tax (a regressive tax)
2. property tax

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Expenditures
1. Education (k-12 schools, public universities)
2. public welfare
3. transportation

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efficiency and equity

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revenue is transferred from private sector to government

distortion in recourse allocation

deadweight loss

administrative burden

complying with tax laws and regualtions

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taxes distort incentives

deadweight loss occurs when the total surplus falls more than the tax revenue

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encourages savings

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filling out tax forms
effort required to keep track of financials
force to make people comply to tax laws

- legal tax avoidance w/ tax lawyers and accountants who look for loopholes in tax system

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average tax rate gauges sacrifices made by tax payers

marginal tax rate gauges how much the tax system distorts incentives

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most efficient -- not most equitable

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i.e. Gas Tax

--> supports idea that the wealthy should be taxed more

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supports idea that the wealthy should be taxed more

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Proportional
Regressive
Progressive

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not common/possible because too difficult to determine if families are alike enough or not

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tax incidence = study of who bears the burden of taxes

tax equity = how the tax burden is distributed

flypaper theory

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tax on specific goods

gas, alcohol, cigarettes

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eliminate special deductions

eliminate administrative burden

would all be from source of income

deduct legitimate business expesnses

--> BUT middle class would be hurt the most