Ch10 INTRODUCTION TO GOVERNMENT FINANCE（课件）- 《财政金融英文版》同步教学（人民大学版）

INTRODUCTION TO GOVERNMENT FINANCE C h a p t e r 10 Government Finance Method of finance proposed for a community or actually used can affect many variables, including: The political equilibrium Overall market equilibrium and efficiency with which resources are employed in private uses The distribution of income Principles of Taxation Taxes – compulsory payments associated with certain activities Revenues from taxation used to purchase inputs necessary to produce government-supplied goods and services or to redistribute purchasing power among citizens Reallocates resources from private to government use in two steps: Ability of individuals to command resources is reduced (reduces income for spending) Revenues collected used to bid for resources necessary to provide government goods and services, plus income support to recipients of government transfers (i.e., Social Security) Tax Base Tax base – item or economic activity on which the tax is levied Economic bases (most commonly used): income, consumption, wealth General tax – taxes all components of the economic bases; no exclusions, exemptions, or deductions from the tax base Selective tax – one that taxes only certain portions of the tax base, or allows exemptions and deductions from general tax base Excise tax – tax on manufacture or sale of particular good or service Tax Rate Structure The relationship between tax collected during a given accounting period and the tax base Average tax rate (ATR) is total dollar amount of taxes collected divided by dollar value of taxable base: Marginal tax rate (MTR) is additional tax collected on additional dollar value of tax base as tax base increases: Proportional Tax Rate Structure One for which the ATR, expressed as percentage of value of the tax base, does not vary with value of the tax base: Progressive Tax Rate Structure Progressive Tax Rate Structure One for which the ATR increases with the size of the tax base Tax bracket gives incremental annual income associated