Fiscal Policy - Questions for Further Study

QUESTIONS FOR FURTHER STUDY

1. Is it fair for one generation to pass trillions of dollars in public debt to future generations? Under what circumstances might this be justified?

2. Is it theoretically possible for public debts to be passed on to each succeeding generation without ever having to be paid? What conditions would be necessary for this to work?

3. Are there any government services you benefit from that you would be willing to forego if it meant you would pay lower taxes?

4. Are there any new government services you would like to receive for which you would be willing to pay higher taxes?



ENDNOTES

[1] http://www.concordcoalition.org

[2] Fiscal years are not the same for all governments. For example, some might begin the fiscal year on July 1st, while others might begin on September 1st.

[3] These data do not include revenues of publicly owned utilities, liquor stores, or insurance-trust activities. They also exclude intergovernmental receipts and payments between state and local governments.

[4] Fiscal years are not the same for all governments. For example, some might begin the fiscal year on July 1st, while others might begin on September 1st.

[5] These data do not include expenditures of publicly owned utilities, liquor stores, or insurance-trust activities. They also exclude intergovernmental receipts and payments between state and local governments.

[6] This category includes expenditures for libraries, hospitals, health, employment security administration, veterans’ services, air transportation, water transport and terminals, parking facilities, transit subsidies, police protection, fire protection, correction, protective inspection and regulation, sewerage, natural resources, parks and recreation, housing and community development, solid waste management, financial administration, judicial and legal, general public buildings, other government administration, interest on general debt, and other general expenditures not elsewhere classified.

[7]http://www.publicdebt.treas.gov/opd/opdpenny.htm

[8] With a progressive tax, people with higher incomes pay a higher percentage of their income than people with lower incomes. The structure of the U.S. individual income tax system is progressive because high-income people face a higher marginal tax rate than those with lower incomes. This is often referred to as being in a higher tax bracket.

[9] Market failures occur when the market system fails to provide the socially desirable outcome. If the market system is left completely alone, it creates too much of some things (e.g., pollution, poverty, and market power) and not enough of other things (e.g., national defense, education, and basic research).

[10] The ability-to-pay principle states that taxes should be paid by those who are best able to pay them. A contrasting idea, the benefits principle, states that taxes should be paid by those who receive the benefits from the services provided by the government. Both principles are used in the U.S. tax structure. Fuel taxes are designed to generate revenue for the construction and maintenance of highways and roads. Since the people who use the highways and roads the most also buy the most fuel, fuel taxes are based on the benefits principle. Since welfare programs redistribute income, they cannot be based on the benefits principle. The people who receive the transfers of income cannot also pay for them.

[11] With a regressive tax, people with lower incomes pay a higher percentage of their income than people with higher incomes. Payroll taxes for Social Security and Medicare, often referred to as social insurance taxes, are regressive because high-income people pay these taxes on only a portion of their income while low-income people pay these taxes on all of their income. Sales taxes are also regressive because they are a represent a higher percentage of income for the poor than for the rich.

[12] Individual income taxes provide about 50% of the federal government’s revenues. Payroll taxes provide about 35% of the federal government’s revenues.

[13] Wishful thinking is probably part of it, too.

[14] Workers tend to earn the most income, and thus pay the most tax revenue, in the years just prior to retirement.

[15] Baby-boomers will add significantly to the Social Security and Medicare expenses of the federal government.