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Chapter 16

Public Finance: Expenditures and Taxes

Graphs and Tables Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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Overview

• You are responsible for the entire chapter, but our focus will be on Taxes:– Kinds of taxes at which level of government– Tax Burden: the total costs that taxes impose on

society– Tax Incidence: the degree to which a tax falls on a

particular group

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Federal Expenditures and Tax Revenues - 2009

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State Expenditures and Tax Revenues - 2009

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Local Expenditures and Tax Revenues - 2009

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Tax Burden

• A tax is progressive if its average rate increases as income increases.

• A tax is regressive if its average rate declines as income increases.

• A tax is proportional if its average rate remains the same regardless of income.

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Tax Burden: Applications

• Personal Income Tax• Sales Taxes• Corporate Income Tax• Payroll Taxes (FICA)• Property Taxes

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Probable Incidence of U.S. Taxes

• Personal Income Tax• Payroll Taxes• Corporate Income Tax• Sales and Excise Taxes• Property Taxes

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U.S. Tax Structure

• The Federal tax system is progressive.• State and local tax structures are largely

regressive.• The overall U.S. tax system is progressive.