a2 c31.docx

1 Page
Unlock Document

University of Toronto Scarborough
Economics for Management Studies

1. A) The term “Excess Burden” is the loss of welfare that is unrecoverable due to tax spending even if the money can be given back to the payers later on. This is also called “Dead Weight Loss”. In the first article “Blame Taxes for Baltimore’s Rot”, the author inferred that the “Third World Like” economic situation is majorly caused by the astonishingly high propertytax rate.As the article illustrates, the propertytax increased by21 times within 35 years in the city of Baltimore. Which leads to the massive abandon rate of houses in the city that will cost extra tax money to demolish or renovate. One clear relationship between property tax and economic development is that the high rocketing tax rate has caused the unemployment to go up so that normal households’ ability of supporting their houses was harmed. Consequently, citizens became poor and the crime rate went up. What’s even worse is that the city government only focused on treating the symptoms instead of the root of the problem. Even higher spendingon social spendings kept highering the tax rate so that the vicious cycle turned unstoppable. This is an obvious example of the impact from excess burden due to high tax rate and low social welfare return. In the second article, the deadweight loss is shown by the undervalued gifts. It illustrates that most of the gifts bought and given buy gift givers are undervalued for at least 10% by the gift receivers. This finally leads to a further extra spending on same goods
More Less

Related notes for MGEC31H3

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.