Bài giảng MicroEconomics - Chapter 16 Public Finance: Expenditures and Taxes

16Public Finance: Expenditures and Taxes Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinLO1Government and the Circular Flow(1) CostsRESOURCEMARKETPRODUCTMARKETBUSINESSESHOUSEHOLDS(4)Goods and services(7)Expenditures(8)Resources(9)Goods and services(4)Goods and services(10)Goods and servicesNet taxes(12)Net taxes(11) (3) Consumption expenditures(3) RevenuesGOVERNMENT(1) Money income (rents, wages, interest, profits)(2) Land, labor, capitalEntrepreneurial ability(2) Resources(5) Expenditures(6) Goods and services16-2LO1Government FinanceGovernment purchasesExhaustiveTransfer paymentsNonexhaustiveBorrowing and deficit spendingOpportunity cost is low during recession; high during growth16-320%40353025201510 5 0 2009 1960 GovernmentpurchasesGovernmenttransfer payments22%15%5% YearPercentage of U.S. OutputLO1Government FinanceGovernment purchases, transfers, and total spending as percentages of U.S. output16-4LO1Federal Expenditures16-5LO1 Personal income tax Progressive tax Marginal tax rate Payroll taxes Corporate income tax Excise taxesFederal Tax Revenues16-6LO1Local, State, and Federal Employment16-7LO2Apportioning the Tax BurdenSize, distribution, and impact of the costs that taxes impose on societyBenefits-received principleAbility-to-pay principle16-8LO2Apportioning the Tax BurdenProgressive tax – average tax rates increase as income increasesRegressive tax – average tax rate declines as income increasesProportional tax – average rate stays the same as income increases16-9Tax incidenceWho really pays the tax?Excise taxTax burden depends on elasticityInelastic vs. elasticEfficiency lossDeadweight lossTransfer of surplus to governmentTax Incidence and Efficiency LossLO316-10 141210 8 6 4 2 0 510152025QPPrice (Per Bottle)Quantity(Millions of Bottles Per Month)SDStTax $2LO3Elasticity and Tax Incidence16-11LO3Elastic DemandInelastic SupplyTaxabcab0Q2P1Q1PPeSmaller efficiency loss with inelastic demandStSDeDicSTaxStP1PPbQ2Q1PaPElasticity and Tax Incidence16-12Elastic SupplyInelastic SupplySmaller efficiency loss with inelastic supplyDDSSStStP1PaPeP1PbPiQ1Q2Q1Q2TaxTaxaabbccLO30PP0QQElasticity and Tax Incidence16-13Efficiency Loss of a TaxPrice (Per Bottle)Quantity(Millions of Bottles Per Month)SDStTax $2Tax paidby consumers 510152025QP141210 8 6 4 2 0 Tax paidby producersEfficiency loss (ordeadweight loss)LO316-14