CHAP18-Taxation-in-the-United-States-and-Around-the-World-公共金融与公共政策课件

1、CHAP18-Taxation-in-the-United-States-and-Around-the-World-公共金融与公共政策课件18.5 Externality/Public Goods Rationales for Deviating from Haig-Simons Taxation in the United States and Around the World18.3 Measuring the Fairness of Tax Systems18.2 Structure of the Individual Income Tax in the United States18.

2、1 Types of TaxationChapter 1818.4 Defining the Income Tax Base18.6 The Appropriate Unit of Taxation18.7 Conclusion18.5 Externality/Public Goods Types of Taxation18 . 1Taxes on Earningspayroll tax A tax levied on income earned on ones job.Taxes on Individual Incomeindividual income tax A tax paid on

3、individual income accrued during the year. capital gains Earnings fromselling capital assets, such asstocks, paintings, and houses.Types of Taxation18 . 1Taxes oCHAP18-Taxation-in-the-United-States-and-Around-the-World-公共金融与公共政策课件CHAP18-Taxation-in-the-United-States-and-Around-the-World-公共金融与公共政策课件T

4、ypes of Taxation18 . 1Taxation Around the WorldTypes of Taxation18 . 1TaxatioTypes of Taxation18 . 1Taxation Around the WorldTypes of Taxation18 . 1TaxatioStructure of the Individual Income Tax in the United States18 . 2Structure of the Individual InStructure of the Individual Income Tax in the Unit

5、ed States18 . 2Computing the Tax Basegross income The total of an individuals various sources of income.adjusted gross income (AGI) An individuals gross income minus certain deductions, for example, contributions to individual retirement accounts. These adjustments have varied over time, but as of 2

6、004 they include:Contributions to retirement savings through Individual Retirement Accounts (IRAs) or self-employed pension plansAlimony paid to a former spouseHealth insurance premiums paid by the self-employedOne-half of the payroll taxes paid by the self-employedStructure of the Individual InStru

7、cture of the Individual Income Tax in the United States18 . 2Computing the Tax Baseexemption A fixed amount a taxpayer can subtract from AGI for each dependent member of the household, as well as for the taxpayer and the taxpayers spouse. Structure of the Individual InStructure of the Individual Inc

8、ome Tax in the United States18 . 2Computing the Tax Basestandard deduction Fixed amount that a taxpayer can deduct from taxable income.There are two forms of deductions from which to choose:1.2.itemized deductions Alternative to the standard deduction, whereby a taxpayer deducts the total amount of

9、money spent on various expenses, such as gifts to charity and interest on home mortgages.Structure of the Individual InStructure of the Individual Income Tax in the United States18 . 2Computing the Tax BaseUnder the itemized deductions route, the taxpayer deducts from his or her income the sum of am

10、ounts from several categories:Medical and dental expenses exceeding 7.5% of AGIOther taxes paid, such as state or local income tax (or sales tax if the state has no income tax), real estate tax, and personal property taxInterest the taxpayer pays on investments and home mortgagesGifts to charityCasu

11、alty and theft lossesUnreimbursed employee expenses, such as union dues or expenses incurred on job traveltaxable income The amount of income left after subtracting exemptions and deductions from adjusted gross income. Structure of the Individual InStructure of the Individual Income Tax in the Unite

12、d States18 . 2Tax Rates and Taxes PaidStructure of the Individual InStructure of the Individual Income Tax in the United States18 . 2Tax Rates and Taxes Paidtax credits Amounts by which taxpayers are allowed to reduce the taxes they owe to the government through spending, for example, on child care.

13、 withholding The subtraction of estimated taxes owed directly from a workers earnings. refund The difference between the amount withheld from a workers earnings and the taxes owed if the former is higher.Structure of the Individual InThe Coming AMT TimebombA P P L I C A T I O NAlternative Minimum Ta

14、x A tax schedule applied to taxpayers with a high ratio of deductions and exemptions to total income.Treasury Secretary Joseph W. Barr produced a list of 155 high-income households that in 1966 had earned over $200,000 but paid no income taxes whatsoever. They had simply taken advantage of existing

15、tax laws to minimize their taxable income.In 1969, President Nixon signed into law a minimum tax intended to ensure that all wealthy households paid some amount of income tax. By 1986, 659 wealthy American households still managed to avoid all income taxes, so Congress strengthened the law, now call

16、ed the Alternative Minimum Tax. The Coming AMT TimebombA P P Measuring the Fairness of Tax Systems18 . 3Average and Marginal Tax Ratesmarginal tax rate The percentage that is paid in taxes of the next dollar earned.average tax rate The percentage of total income that is paid in taxes.Measuring the F

17、airness of Tax Measuring the Fairness of Tax Systems18 . 3Vertical and Horizontal Equityvertical equity The principle that groups with more resources should pay higher taxes than groups with fewer resources. horizontal equity The principle that similar individuals who make different economic choices

18、 should be treated similarly by the tax system. Measuring the Fairness of Tax Measuring the Fairness of Tax Systems18 . 3Measuring Vertical Equityprogressive Tax systems in which effective average tax rates rise with income. proportional Tax systems in which effective average tax rates do not change

19、 with income, so that all taxpayers pay the same proportion of their income in taxes.regressive Tax systems in which effective average tax rates fall with income. Measuring the Fairness of Tax The Political Process of Measuring Tax FairnessA P P L I C A T I O NThere are several different ways to mea

20、sure fairness, and politicians are likely to choose the one that best fits their agendas.An excellent example of this process is the income tax cuts proposed by President Bush and signed into law by Congress in 2003.Democratic critics pointed out that 44% of the tax reductions from this bill would g

21、o to the top 1% of taxpayers.The Bush administration acknowledged that fact but responded by pointing out that these top taxpayers already pay 38% of all income taxes.Democrats responded by highlighting that while the top 1% of taxpayers pay 38% of income taxes, they pay only 30% of all taxes, since

22、 our payroll tax system is less progressive than our income tax system.The administration fired back by noting that 34 million families with children would receive an average tax cut of $1,549 each. The Political Process of MeasuDefining the Income Tax Base18 . 4The Haig-Simons Comprehensive Income

23、DefinitionHaig-Simons comprehensive income definition Defines taxable resources as the change in an individuals power to consume during the year. An individuals potential annual consumption is the individuals total consumption during the year, plus any increases in his or her stock of wealth. Two of

24、 the major difficulties with implementing a Haig-Simons definition in the U.S. tax system are: (a) The difficulty of how to define a persons power to consume/ability to pay, and (b) How to deal with expenditures that are associated with earning a living and not personal consumption. Defining the Inc

25、ome Tax Base18Defining the Income Tax Base18 . 4Deviations Due to Ability-to-Pay ConsiderationsThe desire to take into account expenditures that are not associated with desired consumption is the rationale for one of the major deductions from taxable income allowed by the tax code, the deduction for

26、 property and casualty losses.Another major deduction that may be justified on ability-to-pay considerations is the deduction for medical expenditures. Another deduction that is often justified on ability-to-pay grounds is the deduction for state and local tax payments. Defining the Income Tax Base1

27、8Defining the Income Tax Base18 . 4Deviations Due to Costs of Earning IncomeBecause the comprehensive income definition refers only to the net increment to resources over the period, any legitimate costs of doing business should be deducted from a persons income. Defining the Income Tax Base18What A

28、re Appropriate Business Deductions?A P P L I C A T I O NThe difficulties in defining an appropriate, or inappropriate, business deduction are well illustrated by some classic examples from U.S. tax law:A high school geography teacher claimed a $5,047, six-month, 18-country world tour as a business e

29、xpense. The trip helped him, the teacher claimed, to collect experiences and slides of exotic places to aid his teaching. The tax court disallowed the deduction, concluding that “any actual educational benefit gained from these experiences was de minimis.”A rabbi claimed as a business expense the $4

30、,031 he spent on 700 guests who attended his sons bar mitzvah. The rabbi claimed that his position obliged him to invite all 725 families from his congregation to the celebration. The tax court disagreed, finding that the rabbi “was not required to invite the entire membership of the congregation to

31、 Davids bar mitzvah service and reception as a condition of his employment.”The entertainer Dinah Shore claimed several dresses as business expenses, prompting an investigation by the IRS. She argued that the gowns had been worn only onstage during her performances. In what is now called the “Dinah

32、Shore ruling,” the IRS decreed that a dress may be deducted as a business expense only if it is too tight to sit down in!What Are Appropriate Business Externality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Charitable GivingAn excellent example of the application of the external bene

33、fits rationale is that donations to charitable organizations can be deducted from taxable income. Suppose that the government is concerned that the private sector is not providing sufficient funds to build shelters for the homeless, which is a classic case of a public good. One way to address this p

34、roblem would be to subsidize charitable giving to the homeless in order to increase private sector support.There is another approach the government could take to support the provision of the public good, however; it could provide the good itself. Externality/Public Goods RatioExternality/Public Good

35、s Rationales for Deviating from Haig-Simons18 . 5Spending Crowd-Out Versus Tax Subsidy Crowd-InIf the government subsidizes homeless shelters, the amount of private charitable giving to those shelters would most likely fall. When the government tax subsidizes charitable giving, it may “crowd in,” or

36、 increase, private contributions. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Spending Crowd-Out Versus Tax Subsidy Crowd-InMarginal Versus Inframarginal Effects of Tax SubsidiesWhen economists discuss the impact of tax breaks such as those f

37、or charitable contributions, they often distinguish the marginal and inframarginal impacts of these tax breaks. marginal impacts Changes in behavior the government hopes to encourage through a given tax incentive.inframarginal impacts Tax breaks the government gives to those whose behavior is not ch

38、anged by new tax policy.Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Spending Crowd-Out Versus Tax Subsidy Crowd-InEffects of Tax Subsidies Versus Direct SpendingMathematically, the government should use a tax break instead of direct spending

39、if: the increase in charity per dollar of tax break 1 the reduction in charity per dollar of government spending.Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Spending Crowd-Out Versus Tax Subsidy Crowd-InEvidence on Crowd-Out Versus Crowd-InSe

40、veral studies have concluded that the elasticity of charitable giving with respect to its subsidy is about 1: for each 1% reduction in the relative price of charitable giving, the amount of giving rises by 1%. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-

41、Simons18 . 5Consumer Sovereignty Versus Imperfect InformationWhen the government provides spending directly, then it imposes its preferences on how the funds are spent.By offering tax subsidies to private individuals to donate as they wish, the government directly respects the preferences of its cit

42、izens.The disadvantage of this decentralized provision of charity is that the private sector may not have the appropriate mechanisms in place to ensure efficient distribution of charitable spending. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 .

43、5HousingA second example of a deviation from Haig-Simons that is potentially justified on externality grounds is the tax subsidy to home ownership.mortgage Agreement to use a certain property, usually a home, as security for a loan. The current U.S. tax system does not include the rental value of on

44、es home in taxable income. Nevertheless, the income tax does allow individuals to deduct mortgage interest from their taxable incomebut does not allow them to deduct rental payments. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5HousingThe most

45、 common justification provided for this subsidy to home ownership in the United States is that home ownership has positive externalities that renting does not.Why Subsidize Home Ownership?Effect of Tax Subsidies for HousingDespite wide variation in this tax subsidy, the home ownership rate has remai

46、ned essentially constant since the 1950s, at about 65%.It appears that the tax subsidy is inducing individuals to spend more on houses they would have bought anyway, even without the tax subsidy. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Ta

47、x Deductions Versus Tax CreditsTax credits allow taxpayers to reduce the amount of tax they owe to the government by a certain amount (e.g., the amount they spend on child care).tax deductions Amounts by which taxpayers are allowed to reduce their taxable income through spending on items such as cha

48、ritable donations or home mortgage interest.Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Tax Deductions Versus Tax CreditsEfficiency ConsiderationsFor those who are giving less than $1,000 now, the credit provides a much stronger incentive to

49、increase giving up to the $1,000 level, since it is free (tax payments fall by $1 for each dollar of giving).Once a person gives more than $1,000, there is no more benefit from the tax credit. Which policy, deduction, or credit is more efficient is dictated by two considerations:The first is the nat

50、ure of the demand for the subsidized good.Second, policy makers must decide how important it is to achieve some minimal level of the behavior. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Tax Deductions Versus Tax CreditsEquity ConsiderationsO

51、n vertical equity grounds, tax credits are more equitable than deductions.The value of a deduction rises with ones tax rate, making deductions regressive.Credits, on the other hand, are available equally to all incomes, so that they are progressive. Externality/Public Goods RatioThe Refundability De

52、bateA P P L I C A T I O Nrefundable Describes tax credits that are available to individuals even if they pay few or no taxes.Many conservatives object to the notion that those who owe little or no income taxes get a refund.Supporters of refundability respond to this point by noting that while low-in

53、come families pay little income tax, they do pay a large portion of their income in the form of other taxes.An excellent example of this conundrum is the debate over the child credit, a tax credit for low- and middle-income families introduced in 1997, but on a nonrefundable basis for most families.

54、 In 2001, this credit was expanded from $500 to $600 per child and made partially refundable. The Refundability DebateA P PExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Bottom Line: Tax Expenditurestax expenditures Government revenue losses attributable to tax law provision

55、s that allow special exclusions, exemptions, or deductions from gross income, or that provide a special credit, preferential tax rate, or deferral of liability. Externality/Public Goods RatioExternality/Public Goods Rationales for Deviating from Haig-Simons18 . 5Bottom Line: Tax ExpendituresExternal

56、ity/Public Goods RatioThe Appropriate Unit of Taxation18 . 6The Problem of the “Marriage Tax”Suppose you were hired by the federal government to design a tax system that had three goals: Progressivity.Across-Family Horizontal Equity.Across-Marriage Horizontal Equity.These all seem like worthwhile goals. There is one problem, however: it is lit