Chapter 6
.docx
School
University of Windsor**We aren't endorsed by this school
Course
ACCT 3600
Subject
Economics
Date
Dec 17, 2024
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2
Uploaded by CorporalLyrebird2643
Class Notes – Oct. 31, 2024Progressive Tax System – “the more you make the more you pay” (layman’s terms)-Tranche based*-Why? Why is it important?oA method to attempt to maintain vertical equity-What is the opposite of a progressive tax system? (Use the opposite to get the definition that makes sense)oFlat Tax - uniform/standardized tax systemEveryone pays the same tax rateTax rate is the same irrespective of annual incomeGraph of taxes paid would be flat-Does giving high income earners tax breaks actuallystimulate the economy?oThey may not actually spend the income saved within the economyoCould be a hoarder or an economic engine:Hoarder: does not spend any of the money saved on a lower tax rateEconomic Engine: spends the money saved within the economy; stimulated spending-Governments should want to benefit the most peopleoCreate an equitable tax systemoThe people with lower disposable income need that money to spend on basic needsoIndividuals earning more have more available to be able to contribute-Minimum wage: $17.75o40-hour week x 49 weeks @ minimum wage = $34,790 salaryoWhen minimum wage goes up, everyone else above them must move with themIncreased minimum wages result in more income taxes to the governmentCompanies don’t want to erode bottom line, so will wear down from the topPrices increase, wages decrease, less movement/promotions-Example of tax systemAnnual IncomeTax Rate$0-13,0000%$13,001-29,00018%$29,001-80,00030%$80,001-120,00040%$120,000+50%-Minimum wages and changes to the amount interfere with the basic efficiency of the marketoGovernment gets to take a pound of flesh even from people making the bare minimum income-False school of thought:oIf you give the rich (corporations) tax breaks, they will spend more on things to stimulate the economyoBelief of trickle-down economics-*Note: cannot treat corporations as a homogenous groupoPeople are impossible to predict
oNo evidence at the income tax level that says that lower income tax rates stimulates economic activityWill not change behaviour-What is the perfect tax system?oNo one knowsoNo such thing – only trade-offs in economicsNo system will ever be perfectNo solutions, only trade-offsoSivoni would pick progressive tax system