Chapter 9
Public choice theory is the application of ______ principles to politics.
economic
A successful political campaign would have to address the concerns of the median voters.
median
Public choice theory
Application of economic principles to politics. Government actions are an outgrowth of individual behavior. The behavior of individuals in politics will be influenced by self interest.
The administration burden of the income tax also leads to another...
Deadweight loss
______ and ______ account for roughly half of state and local government expenditures.
Education, public welfare
______ positions tend to win in elections decided by majority votes.
Middle-of-the-road
Are taxes efficient?
No
______ implies that most private sector buyers will tend to be more informed than voters on a given issue.
Rational ignorance
Consumption tax vs Income tax
Taxes all the money that a person/family spends vs. taxes on the money that a person/family earns
When people with different levels of income are treated differently, it is called ______ equity.
Vertical
Is a flat rate tax progressive?
Yes
The government share of GDP changed _____ between 1975 and 2013, but its composition has changed ______.
a little and considerably
Median voter model
a model that predicts candidates will choose a position in the middle of the distribution
excise tax
a sales tax on individual products such as alcohol, tobacco, and gasoline
progressive tax
a tax designed so that a larger percentage of taxable income is taken as taxable income increases
regressive tax
a tax designed so that a smaller percentage of taxable income is taken as taxable income increases
flat tax
a tax that charges all income earners the same percentage of their income
Most people agree that the tax system should be based on either ______ or ______.
ability to pay; benefits received
Federal income tax is a good example of the ________ principle.
ability-to-pay
The _______ burden of a tax leads to a deadweight loss.
administrative
The ________ principle means that the individuals receiving the benefits are those who pay for them.
benefits received
With a(n) ______ tax, individuals are taxed on what they take out of the economy, not on what they put in
consumption
In private markets, an individual ______ link indicates that the goods consumers get reflect what they are willing to pay for.
consumption-payment
Simplifying the tax system would reduce...
deadweight loss
Logrolling
exchanging votes to get support for legislation
From 1970 to 2013, national defense spending as a fraction of GDP ______.
fell
The amount of information that is necessary to make an efficient decision is much ______ in political markets than in private markets.
greater
Special Interest Group
groups with an intense interest in particular voting issues that may be different from that of the general public
Income transfer payments ______ in the 1980's and 1990's.
increased
Rent seeking occurs when...
individuals and firms use resources, like money and lobbyists, to influence government to grant them special privileges
Rational ignorance
lack of incentive to be informed
Excise taxes are considered regressive because lower income people spend a(n) ________ fraction of their incomes on such taxes than do higher-income people.
larger
Public choice economists lean toward...
less government because they want less waste
If voters were ______ informed, special interest groups would have less influence on political results, other things being equal.
more
Sales taxes account for ______ state and local tax revenue than property taxes.
more
The US relies ______ heavily on income-based taxes than most other developed countries in the world.
more
At the federal level, _____ half of taxes are from personal income taxes and corporate income taxes.
more than
If a higher income person paid the same taxes as a lower income person, that tax would be considered _______.
regressive
Even though actors in both the private and public sectors are _______, the ______ are different.
self interested; "rules of the game"
Public choice economists believe that the behavior of individuals in politics, as in the marketplace, will be influenced by _____.
self-interest
Compared to private-sector decisions, acquiring info to make public-sector decisions will tend to have ______ benefits and _______ costs.
smaller; larger
By the mid-1970's, for the first time in history, roughly half of government spending in the US was for ______.
social concerns
Governments obtain revenue through two major avenues
taxation and borrowing
sin taxes
taxes on certain products that discourage the use of the product such as alcohol or tobacco
ability-to-pay principle
the belief that those with the greatest ability to pay taxes should pay more than those with less ability to pay
vertical equity
the concept that people with different levels of income should be treated differently
Benefits received principle
the individuals receiving the benefits are those who pay for them