The text book is essential to completing the assignment
ECN 231
ASSIGNMENT 9
Chapter 12
The Public Sector
Additional resources:
Policy Basics: Where Do Our Federal Tax Dollars Go?
Center
on Budget and Policy Prio
rities, March 11, 2015
.
http://www.cbpp.org/cms/?fa=view&id=1258#
Government Revenue and Expenditures
2014
Source for Federal Government Revenue and Expenditures
This link takes you to the data from Historical Tables:
http://www.whitehouse.gov/omb/budget/Historicals
Several good articles here
.
Start with “Tax Systems”, it covers
the
benefits received and ability to pay
principles of taxation.
Then look
around at other articles you find interesting.
http://www.shmoop.com/taxes/
Due date:
April 6, 2015
35
points
In this assignment you will learn to:
?
Describe changes in governments spending over time
?
Describe
the largest federal government expenditures and revenue sources
?
Compare US government expenditures and taxation to those in other countries
?
Contrast progressive, regressive, and proportional taxation
?
Contrast the average tax rate and marginal tax rate
?
Exp
lain why certain taxes are progressive or regressive
?
Explain the majority rule problem
?
Describe the special
–
interest group effect
?
Explain rational voter ignorance
?
Explain bureaucratic efficiency
?
Describe the shortsightedness effect
Introduction
There is a lot of misunderstanding about government spending and taxation. Many people
believe government is too big, growing too fast, and taxes are always going up. This chapter
gives you some facts about spending and taxes so you can make up your own mi
nd. You will
also learn about the
situations
where government
is inefficient
when it allocates resources
through the political process.
Practice
On pp.
351
–
3
Sample Quiz questions
2 through 8
, 14, 15, and 17
through 20 are good practice
for this assignment. Answers are in the back of the textbook.
1.
Total government spending is about 38% of GDP. Use Exhibit 1 to calculate what
percentage of GDP is spent by the federal government and what percentage is spent by
state and local governments. 2 points
2.
Use Exhibit 6 to answer this question. How have taxes as a percent of GDP changed since
the end of WWII?
Which has changed more, state and local taxes or federal taxes? 3 points
3.
Look at “
Policy Basics: Where
Do Our
Federal Tax Dollars Go?”
and Exhibit 2 in the
textbook.
Note how Income Security has become the largest type of federal spending.
What exactly is included in Income Security? What do you think might have caused the
growth in spending in this category?
5 p
oints
Articles at this link will help with questions
4 and 5
http://www.shmoop.com/taxes/
4.
Suppose the government placed a tax on cigarettes and used the money to treat lung
cancer patients. Explain how this ta
x based would be an example of the benefits received
principle. 5 points
5.
Explain
how the Federal income tax follows the ability to pay principle.
5
points
6.
If you got a $1000 bonus in your paycheck and you wanted to know how much extra
income
tax you have
to pay would you use the average tax rate or
the marginal tax rate?
Explain why.
5 points
7.
Answer
one
of the following 5 points:
a. Explain why the Social Security (payroll) tax is regressive.
b
. Explain why sales taxes are regressive.
7.
Answer
one
of the following. 5 points
a.
Often
government projects are put to a vote to “let the people decide”. Explain why a
majority of voters might
reject a project where benefits are greater than costs
.
b.
Explain
why politicians support programs that only
benefit
a small number of people
in a special interest group
.
Why don’t voters vote against these politicians?
c.
In Michigan voters elect the state Board of Education. Explain why most voters will be
uninformed about the candidates for the Board.
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