Econ Chapter 9-1

What is the marginal tax rate?

(progressive) Rate on the next dollar earned

Efficiency-- What are two criteria for making a tax efficient?

Easy to administer and collect

Equity-- What criteria is generally recognized as making taxes fairer?

Government makes "fairness" *loopholes*

Ability-To-Pay Principle-- What two factors is the ability-to-pay principle based on?

Higher incomes pay more, lower income pay less

Productivity and Growth-- What effect might taxes have on productivity and economic growth?

Incentives to save, invest, and work

What three general types of taxes exist in the U.S?

Proportional. Progressive, Regressive

Resource Allocation-- What can happen to the factors of production when prices go up as an end result of taxation?

Quantity Demanded goes down

Simplicity-- What makes taxes more tolerable to many people?

Sales Tax

Behavior Adjustment-- What is a sin tax and what is it usually applied to?

Tax on sins (Smoking, drinking, tanning)

Benefit Principle-- What is the benefit principle of taxation?

Those who benefit the government goods should pay in proportion to the amount of benefits they receive. (toll roads, gasoline tax, tire tax)