Taxation and Economic Policy - Lecture Notes | POLI 100, Study notes of Local Government Studies

Download Taxation and Economic Policy - Lecture Notes | POLI 100 and more Study notes Local Government Studies in PDF only on Docsity! Taxation and economic policy 1. Basic models for organizing an economy 2. Fiscal and monetary policy 3. Tax policy 4. Major sources of revenue and major expenditures 5. The budget process 6. Types of policy: distributive, redistributive, and regulatory 7. The policy process 8. Iron triangles and issue networks 9. Current account balances Fiscal policy is the use of government spending in combination with tax policy for the purpose of influencing the overall performance of the national economy. Monetary policy is the use of government’s ability to control the supply and availability of money for the purpose of influencing the overall performance of the national economy. Entirely Neutral 20% Tax System Gross Net Income Tax Income 100,000 -- 20,000 80,000 60,000 -- 12,000 48,000 30,000 -- 6,000 24,000 20,000 -- 4,000 16,000 12,000 -- 2,400 9,600 Progessive Tax System 0% on first 10,000 10% between 10,001 and 20,000 20% between 20,001 and 60,000 40% on income over 60,000 Gross Net Income Tax Income 100,000 -- 25,000 75,000 (0+1+8+16) 60,000 -- 9,000 51,000 (0+1+8) 30,000 -- 3,000 27,000 (0+1+2) 20,000 -- 1,000 19,000 (0+1) 12,000 -- 200 11,800 (0+0.2) 10,000 -- 0 10,000 (0) Tax policy 1. consumption versus income Should the use of money or the acquisition of money be taxed? 2. vertical (progressive, flat, and regressive) What is the fairest system? 3. horizontal (loopholes and government incentives) To a large extent this was the focus of Gucci-Gulch. 4. estate or death taxes Should the accumulated savings of a person be taxed when that person dies? What did the heirs do to deserve this income? Federal Budget outlays (2008 estimated) @ $2,931,222,000 (@20.5% of GDP) Principal Outlays as a percent of total federal budget Defense 20.7% Social security 21.0% Medicare 13.5% Health 9.7% Income security 13.3% Interest payments 8.3% ______ 86.5% 120% 4 . ° The National Debt as a Percent of Through 110% 4 Gross Domestic Product Feb. 27 400% 4 (Data through 2007 is from Bush's whitehouse.gov) 90% 4 Obama 80% 4 70% 4 60% 4 Truman 50% 4 Ike \ Oe ~ Kennedy; 30% 5 LBJ Ni . ixon | @ 20% 4 ° Ford t of oO 10% zFacts.com 0% r 7 r t r . . 1940 1950 1960 1970 1980 1990 2000 2010 The Budget Process President and the Office of Management and Budget Congress and the Congressional Budget Office Economic Management President: Council of Economic Advisors Congress: Joint Economic Committee Iron Triangles Bureaucracy Congressional Interest Subcommittee Group Bureaucracy supplies Congress with information and help with constituents Congress supplies bureaucracy with favorable rulings and information Bureaucracy supplies Interest groups with rulings and information Interest group supplies bureaucracy with information and support Congress supplies interest group with legislation Interest group supplies congress with information and campaign support Issue Network An issue network is a set of individuals including public officials and representatives of various interests who have expertise within a given policy area, and who come together, usually temporarily, to work on a particular problem within that policy area. Current-account balance The current-account balance summarizes a country's current transactions with the rest of the world, which include trade, income from international investments, and transfers. Currently the U.S. is going into debt at a slower rate than it has over the past several years, but are still considerably on the debtor side (over $300 billion – has been over 700 billion). This is mostly accounted for by high trade deficit on goods. Other major sources are a relatively low national savings rate, and high government deficit.