ECON 2020 Lecture Notes - Lecture 12: Fiscal Multiplier, Government Spending, Flat Tax
Document Summary
Progressive - as income increase so does the tax rate: payroll tax. Income cap = ,500 / above cap tax rate = 0: medicare. Split between employee and employer: federal income tax - Majority is paid by the wealthy, almost 85% of all federal income tax revenues paid by the wealthiest 20% Interest income: federal payroll tax - Majority is paid by middle class working americans, Bottom 40% still contribute through the payroll tax but not income tax. Majority of working americans pair more each year in payroll tax $ than for. Mpc - marginal propensity to consume: ex. Mpc = 0. 8 with an additional in disposable income (spend 80 cents, save 20 cents) Change in national income(y) / change in government spending (g) = 1/ 1-mpc: tax multiplier. Change in income(y) / change in tax(t) = -mpc / 1-mpc = -0. 8/ 1-. 8 = -4.
