1. The Economics of Taxation

2. Taxes Income Property Sales Tax – Money paid to the government
Common Taxes
Income
Property
Sales

3. Economic Impact of Taxes
Resource Allocation
Behavior Adjustment
Productivity and Growth
Incidence of a Tax
Who actually pays the tax?

4. Criteria for Effective Taxes
Equity
Fairness. Taxes should be impartial and just.
What is Fair?
Simplicity
Both payers and collectors should understand taxes
Efficiency
Easy to administer

5. Two Principles of Taxation
Benefit Principle
Those who benefit from government goods and services should pay in proportion to the amount of benefits they receive
Ability-to-Pay Principle
People should be taxed according to their ability to pay. The more money you have the more taxes you should pay

6. Types of Taxes Proportional Tax Progressive Tax Regressive Tax
Everyone pays the same percent
Progressive Tax
The higher the income the higher the tax percentage
Used in the US for Income Tax
Regressive Tax
Higher percentage on Lower incomes