Principles+of+Economics+7th+Edition+Mankiw-Solution+Manual Chapter 12

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1、Chapter12/TheDesignoftheTaxSystem❖21912THEDESIGNOFTHETAXSYSTEMWHAT’SNEWINTHESEVENTHEDITION:Alltableshavebeenupdatedtothemostrecentlyavailablenumbers.AnewIntheNewsboxon“TaxExpenditures"hasbeenadded.LEARNINGOBJECTIVES:Bytheendofthischapter,studentsshouldunderstand:Øhow

2、theU.S.governmentraisesandspendsmoney.Øtheefficiencycostsoftaxes.Øalternativewaystojudgetheequityofataxsystem.Øwhystudyingtaxincidenceiscrucialforevaluatingtaxequity.Øthetrade-offbetweenefficiencyandequityinthedesignofataxsystem.CONTEXTANDPURPOSE:Chapter12isthethirdc

3、hapterinathree-chaptersequenceontheeconomicsofthepublicsector.Chapter10addressedexternalities.Chapter11addressedpublicgoodsandcommonresources.Chapter12addressesthetaxsystem.Taxesareinevitablebecausewhenthegovernmentremediesanexternality,providesapublicgood,orregulate

4、stheuseofacommonresource,itneedstaxrevenuetoperformthesefunctions.ThepurposeofChapter12istobuildonthelessonslearnedabouttaxesinpreviouschapters.Wehaveseenthatataxreducesthequantitysoldinamarket,thatthedistributionoftheburdenofataxdependsontherelativeelasticitiesofsup

5、plyanddemand,andthattaxescausedeadweightlosses.WeexpandthestudyoftaxesinChapter12byaddressinghowtheU.S.governmentraisesandspendsmoney.Thedifficultyofmakingataxsystembothefficientandequitableisthendiscussed.Chapter12/TheDesignoftheTaxSystem❖219KEYPOINTS:·TheU.S.govern

6、mentraisesrevenueusingvarioustaxes.Themostimportanttaxesforthefederalgovernmentareindividualincometaxesandpayrolltaxesforsocialinsurance.Themostimportanttaxesforstateandlocalgovernmentsaresalestaxesandpropertytaxes.·Theefficiencyofataxsystemreferstothecostsitimposeso

7、ntaxpayers.Therearetwocostsoftaxesbeyondthetransferofresourcesfromthetaxpayertothegovernment.Thefirstisthedeadweightlossthatarisesastaxesalterincentivesanddistorttheallocationofresources.Thesecondistheadministrativeburdenofcomplyingwiththetaxlaws.·Theequityofataxsyst

8、emconcernswhetherthetaxburdenisdistributedfairlyamongthepopulation.Accordingtothebenefitsprinciple,itisfairforpeopletopaytaxesbased