Sources of Government Revenue. Revenue collection by all levels of Government has grown dramatically. Increased 800% since 1940. Economic Impact of Taxes
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Increased 800% since 1940
A. Resource allocation – taxes can raise or lower the cost of production and therefore affect supply which in turn will affect price which in turn will affect demand. Cutbacks in some industries mean resources will have to go elsewhere to other industries
D. The incidence of a tax is the final burden of the tax; it is easier for a producer to shift the incidence of a tax to the consumer if the demand is inelastic; the more elastic the demand, the more likely the producer will absorb much of the tax.
(see page 225 in textbook)
D. This principle is based on two ideas: that society can’t always measure the benefits derived from government spending and that people with higher incomes suffer less discomfort in paying taxes than people with lower incomes.
A. Excise tax – a tax on the manufacture of sale of certain items. (gas, liquor, tires, legal betting, coal etc.) These are regressive taxes because low income families spend larger portions of their income on these goods than do high-income families
C. The gift tax is placed on large donations of money or wealth and is paid by the donator
D. A custom duty is a charge levied on goods brought in from other countries
E. User fees are charged for the use of a good or service
F. User fees are based on the benefits received principle of taxation
A. Intergovernmental revenue are funds collected by one government and distributed to another level. States receive a lot of money from the federal government to help with education, highways, health and welfare.
C. Sales tax – levied on all consumer purchases; second largest source of income
D. Employee retirement contributions make up the third largest source of income
F. Other sources include interest on surplus funds, fees from state owned colleges, universities, and schools, and corporate income taxes
(largest source of local money)
F. 2003 – reduced the top four tax brackets and capital gains taxes.