Ch13 THE THEORY OF INCOME TAXATION（课件）- 《财政金融英文版》同步教学（人民大学版）

THE THEORY OF INCOME TAXATION C h a p t e r 13 Income Tax Taxes on personal income represent the dominant source of revenue for federal government in the U.S. Accounted for 44% of federal income in 2006 Also used by state governments Before 1913, major source of revenue for federal government was customs duty, or tariffs. A 1913 constitutional amendment empowered Congress to levy taxes on personal and business incomes. Chapter discussion assumes that all income, regardless of its source or use, is taxed at the same rate. Comprehensive Income Comprehensive income is the sum of a person’s annual consumption expenditures and the increment in that person’s net worth in a given year: I = C + ΔNW Concept also called the Haig-Simons definition of income Net worth is the value of a person’s assets held at any point in time less the value of a person’s liabilities, or debts. Capital gains are increases in the value of assets over the accounting period. Sources of Personal Income Sources and Uses of Income Net capital gains are capital gains minus capital losses Sources are always equal to uses Income-in-Kind Income in the form of goods and services rather than cash payments Home production of goods and services Occupations allowing workers flexible hours and freedom from pressures Serious problem involved in administering income tax is treatment of nonmonetary transactions Taxation of all types of income-in-kind infeasible Some easy to tax, such as fringe benefits provided by employers (medical and life insurance, vehicles, etc.) Flat-Rate Income Tax Reformers suggest that U.S. tax system would be more efficient with a flat-rate income tax. No loss in efficiency will occur in how people spend money or earn it The tax, however, is likely to distort choices made concerning allocation between work and leisure and between consumption and saving or productive investment. Flat-Rate Income Tax Income and Substitution Effects Impact of tax on work effort depends on income and sub