Textbook Notes (363,264)
Economics (319)
ECON 110 (192)
Chapter 18

# Chapter 18.docx

3 Pages
35 Views

School
Queen's University
Department
Economics
Course
ECON 110
Professor
Ian James Cromb
Semester
Winter

Description
Chapter 18: Taxation and Public Expenditure Taxation in Canada Progressive Taxes  When the gov’t taxes one income group in society more heavily than another, it influences the distribution of income o The effect of income on the distribution can be shown in terms of progressivity  A Progressive tax takes a larger percentage of income from high-income people than from low-income people  reduces inequality of income  A Proportional tax takes amounts of money from people in direct proportion to their income – ie. Everyone pays 10% of their income  A Regressive tax takes a larger percentage of income from low-income people than it does from high-income people  increases inequality of income  Average Tax Rate: The percentage of income the person pays in taxes  Marginal Tax Rate: The percentage of the next dollar earned that the person pays in taxes The Canadian Tax System Personal Income Taxes  This tax is paid directly to the gov’t – calculation of income includes all types of income o Then a number of deductibles are removed and left with taxable income  A tax bracket is a range of taxable income for which there is a constant marginal tax rate o Pay “x” rate for first “y” dollars, then “z” rate for next “w” dollars, and so on Corporate Income Taxes  This is a proportional tax rate applied to corporate profits o Includes return on capital and economic profits Excise and Sales Tax  An excise tax is a tax levied on a particular commodity o Tobacco, alcohol, and gasoline have excise taxes placed on them o Considered regressive since these goods make up a greater proportion of total expenditure for low-income groups than higher-income groups  A sales tax applies to the sale of most goods and services o Slightly regressive because poorer families tend to spend a larger proportion of their incomes than richer families Property Tax  Taxing the value of existing property creates two problems o Someone has to assess the current market value of property o Sometimes the owners have low income and have difficulty paying the taxes  Rich people tend to live in bigger houses and therefore pay more property taxes – but as a fraction of their income, poorer people are paying more  mildly regressive tax Evaluating the Tax System Taxation and Equity  There are two principles that are helpful in assessing equity in taxation o Ability to Pay, and according to Benefits Received The Ability-to-Pay Principle  Vertical Equity concerns equity across income groups and focuses on comparisons between individuals or families with different level of income o Requires progressive taxation  Horizontal Equity concerns equity within a given income group and is concerned with establishing just who should be considered equal in terms of ability to pay taxes The Benefit Principle  According to this principle, taxes should be paid in proportion to the benefits that taxpayers derive from the expenditure o Ex. High taxes on cigarettes since smokers require more healthcar
More Less

Related notes for ECON 110

OR

Don't have an account?

Join OneClass

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

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.