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Public Choice Theory and the Economics of Taxation. PUBLIC CHOICE THEORY. Majority Voting. Fails to take into account the strength of the preferences of individual voters. PUBLIC CHOICE THEORY. Majority Voting:. Inefficient Voting Outcomes. COMPARE $300 TAX TO PERSONAL. - PowerPoint PPT Presentation
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Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Public Choice Theoryand the
Economics of Taxation
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Majority Voting
Fails to take into account the strength of the preferences of individual voters.
PUBLIC CHOICE THEORY
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Majority Voting:Inefficient Voting Outcomes
COMPARE $300 TAX TO PERSONALBENEFIT OF A PUBLIC GOOD
Adams - BENEFIT $700 - "YES"
Benson - BENEFIT $250 - "NO"
Conrad - BENEFIT $200 - "NO"
PUBLIC CHOICE THEORY
The “No” Votes Win but, the
decision is inefficient…
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Ben
efit
; Ta
x
$700
$250$200
$300
(YES)(YES) (NO)(NO) (NO)(NO)
An Inefficient “NO” Vote
Adams Benson Conrad
The NO vote wins butis inefficient since...
PUBLIC CHOICE THEORY
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Ben
efit
; Ta
x
$700
$250$200
$300
(YES)(YES) (NO)(NO) (NO)(NO)
An Inefficient “NO” Vote
Adams Benson Conrad
The NO vote wins butis inefficient since...
MSB $1,150 > MSC $900
PUBLIC CHOICE THEORY
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
U.S. Tax Structure
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
TAX STRUCTURES
Who pays the tax?• Benefits-Received Principle• Ability-to-Pay Principle
Tax as a percentage of income:• Progressive Tax• Regressive Tax• Proportional Tax
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
TAX APPLICATIONS:
• Personal Income TaxProgressive• Sales TaxRegressive• Corporate Income TaxProportional• Payroll TaxesRegressive• Property TaxesRegressive• Estate & Gift TaxesProgressive
Identify whether progressive, regressive, or proportional
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
HIGHEST TAX BRACKETS BY DECADE
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Revisiting the role of elasticity (ED & ES)
• More elastic curves create more DWL
• More inelastic curve pays more of the tax
Why tax if it creates DWL?• Redistributive Goals• Reducing Negative
Externalities
TAX INCIDENCE ANDEFFICIENCY LOSS
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Tax Distortions and Elasticities
Demand
Supply
Inelastic Demand
Price
0 Quantity
Size of tax
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Federal Tax System
Progressive
State and Local Tax
Largely Regressive
Overall U. S. Tax System
Progressive
TAX PROGRESSIVITY IN AMERICA THE U.S. TAX STRUCTURE
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
How Much Tax do the Rich Pay?
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Public Choice Theory
Apportioning the Tax Burden
Tax Applications
Tax Incidence and Efficiency Loss
The U.S. Tax Structure
Taxes and Government Spending
![[Bernard Salanie] the Economics of Taxation(Bookos.org)](https://img.pdfslide.us/doc/110x75/552d790455034629178b4719/bernard-salanie-the-economics-of-taxationbookosorg.jpg)
