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Chapter 4 additional terms Inflation\unemployment relationship Monetary and fiscal policy How Federal Reserve sets monet

Budgets and Taxes Note: the less important slides are hidden Go to View | Slide Sorter to see them all. Chapter 4 additional terms Inflationunemployment relationship Monetary and fiscal policy How Federal Reserve sets monetary policy Demand side vs. Supply side (as in Lafer curve)

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Chapter 4 additional terms Inflation\unemployment relationship Monetary and fiscal policy How Federal Reserve sets monet

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  1. Budgets and TaxesNote: the less important slides are hidden Go to View | Slide Sorter to see them all Chapter 4 additional terms Inflation\unemployment relationship Monetary and fiscal policy How Federal Reserve sets monetary policy Demand side vs. Supply side (as in Lafer curve) Line item veto\Balance Budget Amendment

  2. Revenues and Spending (Outlays)

  3. Raises the Debt Ceiling in exchange for long term budget cuts (900 Billion 1.2 Trillion) over ten years. “Supercommittee must produce something better by November 23, 2011 (it didn’t) Mandatory cuts now go into place, beginning January 2013-2021 SEQUESTER: Cuts:across the board cuts, except Social Security, Medicare and Medicaid beneficiaries Budget Control Act of 2011

  4. Total Government Surplus\ Deficit, % of GDP OECD Economic Outlook, Statistical Appendix, 2012

  5. Total Government Debt, % of GDP OECD Economic Outlook, Statistical Appendix, 2012

  6. Deficits Japan -9.9% United States -8.5 Ireland -8.1 Spain -8.1 Greece -6.9 United Kingdom -6.6 Portugal -5.2 Israel.....-4.7 Slovak Republic -4.6 France -4.5 Debt Greece 146% Japan 134 Italy 98 United States 86 Portugal 83 Belgium 83 Ireland 80 United Kingdom 73 France 66 Spain 58 Ten Largest Deficits and Debts, % of GDP, 2012 OECD Economic Outlook, Statistical Appendix, 2012 Health Care | Education | Higher Education | Poverty | Crime and Punishment | Debt and Deficits | Defense

  7. Fiscal 2013 Budget

  8. Debt • triples • Interest • Payments • go down

  9. Taxation

  10. Fairness? • absolute equity – all benefit from government – all should pay equally(head tax) • Ability to pay -- justification for progressive taxation (graduated income tax) • Benefit principle -- tax in proportion to the benefit (gas tax, social security payroll tax)

  11. Economic Neutrality -- Tax systems should exert minimal impact on the spending and business decisions of individuals and businesses. Violations of neutrality: (create positive and negative externalities) • tax subsidies for oil drilling, homeownership,health care • Tax incentives for positive social behavior • Sin taxes • Brick and Mortar Sales tax vsInternet sales

  12. Top 20 Biggest Tax Expenditure of US Govt.

  13. Efficiency and Simplicity • Cost of collecting taxes(toll roads vs. IPass) • Cost of compliance (tax lawyers and accoutnants)

  14. Visibility • Taxes should not be hidden – those who bear the burden should be aware(Hidden taxes: Gross Receipts Tax, Lottery?)

  15. Other principles • Broad base (to allow lower rates) • Predictable and stable supply of revenue • Diverse sources (for stability and lower rates) • Addresses geographic competition

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