ECON 201 Lecture Notes - Lecture 4: Regressive Tax, Tax Rate, Progressive Tax
Document Summary
Political economy: study of gov. using analytic methods of economics. Voting cycles: policies randomly change over time because there is no actual majority preference. The politician supplier- legislative bodies are like board of directors. Politicians motivated by self-interest, just like firms and consumers and bureaucrats. Issues that are inefficient, but yield clearly defined current benefits at the expense of future costs that are difficult to identify. Special interest issue: inefficient but generates large personal benefit for a small number of constituents while imposing a small individual cost on a large number of others. Logrolling (vote trading) strengthens the special interest effect. Amount determined by ongoing programs such as social security and medicare. A gov. budget is a plan for both spending and raising funds for the government. Us federal government collects about two thirds of the taxes in our economy. Payroll taxes: deducted from paychecks to fund social security and medicare.