andGovernmentIntervention(M-Grow-Hill,微观经济.pptx

andGovernmentIntervention(M-Grow-Hill,微观经济.pptx

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TaxationandGovernmentIntervention,Chapter7,LaugherCurve,Twoeconomistsmeetonthestreet.Q.Howsyourwife?

A.Relativetowhat?

TaxationandGovernment,Mostpeopledisliketaxes.Forgovernmenttooperate,itmusttax.Forthemarkettowork,itneedsgovernment.,HowMuchShouldGovernmentTax?

Inordertoanswerthis,wemustknowthecostsandbenefitsoftaxation.,HowMuchShouldGovernmentTax?

Frompreviouschaptersweknowthatgovernmentsrolesinclude:

Providingastablesetofinstitutionsandrules.Promotingeffectiveandworkablecompetition.Correctingforexternalities.,HowMuchShouldGovernmentTax?

Frompreviouschaptersweknowthatgovernmentsrolesinclude:

Creatinganenvironmentthatfosterseconomicstabilityandgrowth.Providingpublicgoods.Adjustingforundesirablemarketresults.,TheCostsofTaxation,Thecostsoftaxationinclude:

ThedirectcostoftherevenuepaidtogovernmentThelossofconsumerandproducersurpluscausedbythetaxThecostofadministeringthetaxcodes.SeeFigure7-1.,TheCostsofTaxation,Whengovernmentraisestaxes,thereisalossofconsumerandproducersurplusthatisnotgainedbygovernment.,Thisisknownasdeadweightloss.,TheCostsofTaxation,Graphicallythedeadweightlossisshownonasupply-demandcurveasthewelfarelosstriangle.,Thewelfarelosstriangleageometricrepresentationofthewelfarelossintermsofmisallocatedresourcescausedbyadeviationfromasupply-demandequilibrium.,TheCostsofTaxation,S1,P1t,Quantity,Price,Producersurplus,Consumersurplus,Deadweightloss,tax,TheCostsofTaxation,Thereareothercostsoftaxation.,Resourcesmustbedevotedbythegovernmenttoadministerthetaxcodesandbycitizensandbusinessestocomplywithit.,TheCostsofTaxation,Payrollaccountinghasbecomesoonerous,businesseslargeandsmalloftenpaypayroll-accountingfirmstokeepupwithchangingfederalandstatepayrollrulesandactuallyissuepaychecksfortheirclientsemployees.,TheBenefitsofTaxation,Thebenefitsoftaxationarethegoodsandservicesthatgovernmentprovides.,TheBenefitsofTaxation,Someofthesebenefitsarethepartofthebasicinstitutionalstructureofamarketeconomythatallowsittoworkefficiently.,Thebasiclegalsystemisanexample.,TheBenefitsofTaxation,Stillothersbenefitstakeonthequalitiesofapublicgoodnationaldefense,forexample.,TheBenefitsofTaxation,Othersbenefitsareprovidedforreasonsofequityorbecausetheyprovidepositiveexternalities.,TheBenefitsofTaxation,Thepolicydebateaboutthebenefitsoftaxationgenerallyfocusesongoodsthatcouldbesuppliedbythemarketbutarepubliclysupplied.,Educationandhealthcareareexamples.,TheBenefitsofTaxation,Measuringthebenefitsofthesegoodsisdifficultsincetheyarenotprovidedinamarketsetting.,TwoPrinciplesofTaxation,TwoPrinciplesofTaxation,Thebenefitprinciplestatesthattheindividualswhoreceivethebenefitofthegoodorserviceshouldpaythetaxnecessarytosupplythegood.Examplesaregasolinetaxesandairporttaxes,bothpaidbytravelers.,TwoPrinciplesofTaxation,Theability-to-payprinciplestatesthatindividualswhoaremostabletobeartheburdenofthetaxshouldpaythetax.,Thebestexampleofthisisaprogressivetax,suchastheU.S.incometax.,DifficultyofApplyingthePrinciplesofTaxation,Theprinciplesoftaxationaredifficulttoapply.Thetwoprinciplesoftenconflict.,DifficultyofApplyingthePrinciplesofTaxation,Infundinghealthcare,forexample,thepoorshouldpaybecausetheybenefitthemost,whileundertheability-to-payprinciple,therichshouldpay.,DifficultyofApplyingthePrinciplesofTaxation,Theelasticityconcepthelpsustounderstandthetradeoffs.,Themorebroadlythegoodorserviceisdefined,themoreinelasticitsdemandorsupply.,DifficultyofApplyingthePrinciplesofTaxation,Governmentsshouldtaxinelasticgoodsorservices.,Inthelanguageofconsumerandproducersurplus,ifthegovernmentseekstominimizethewelfareloss,itshouldtaxgoodswithinelasticsuppliesanddemands.,WhoBearstheBurdenofaTax?

Thesupplyanddemandframeworkgivestheanswertothisquestion.,BurdenDependsonRelativeElasticity,Thepersonwhophysicallypaysthetaxisnotnecessarilythepersonwhobearstheburdenofthetax.Theburdenofthetaxisrarelysharedequallysincetheelasticitiesarerarelyequal.,BurdenDependsonRelativeElasticity,Elasticityisameasureofhoweasyitisforthesupplierandconsumertochangebehaviorandsubstituteanothergood.,BurdenDependsonRelativeElasticity,Therelativeburdenofthetaxdictatesthatthemoreinelasticonesrelativesupplyanddemand,thelargerthetaxburdenonewillbear.,BurdenDependsonRelativeElasticity,Ifdemandismoreinelasticthansupply,consumerswillpaythehighershare.Ifsupplyismoreinelasticthandemand,supplierswillpaythehighershare.,BurdenDependsonRelativeElasticity,Whopaysataxisnotnecessarilywhobearstheburden.,Thepersonwhoactuallypaysthetaxdoesnotmatter,andthepersonwhobearstheburdencandifferfromthepersonwhopays.,WhoBearstheBurdenofaTax?

SupplierPaysTax,S1,510,tax,Consumerpays,Supplierpays,WhoBearstheBurdenofaTax?

590,S1,S0,Demandisinelastic,Demand,tax,Consumerpays,Supplierpays,WhoBearstheBurdenofaTax?

ConsumerPaysTax,D0,S0,510,tax,Consumerpays,Supplierpays,D1,TaxIncidenceandCurrentPolicyDebates,Theanalysisoftaxincidenceishelpfulwhendiscussingcurrentpolicydebates.,SocialSecurityTaxes,SocialSecuritytaxesarepayrolltaxesforagovernment-runretirementprogram.Bothemployerandemployeecontributethesamepercentageofbefore-taxwagestotheSocialSecurityfund.,SocialSecurityTaxes,Thefactthatboththeemployerandemployeecontributethesamepercentagedoesnotmeantheysharetheburdenequally.,SocialSecurityTaxes,Onaverage,laborsupplytendstobelesselasticthanlabordemand,sotheSocialSecuritytaxburdenisprimarilyonemployees.,SalesTaxes,Salestaxesarethosepaidbyretailersonthebasisoftheirsalesrevenue.Sincesalestaxesarebroadlydefined,consumersfindithardtosubstitute.Demandisinelasticsoconsumersbearthegreaterburdenofthetax.,SalesTaxes,Consumerscannowbuyontheinternetwheresalesarenottaxedsothatretailstoreswillbearagreaterburdenofthetaxleviedontheirsales.,GovernmentIntervention,Taxationisbutonewayinwhichgovernmentaffectsourlives.Otherformsofgovernmentinterventionincludepricecontrols.,GovernmentInterventionasImplicitTaxation,Governmentinterventioncanbeseenasacombinationtaxandsubsidy.,PriceCeilings,Apriceceilingisagovernment-setpricebelowmarketequilibriumprice.Itisanimplicittaxonproducersandanimplicitsubsidytoconsumers.Thiscausesalossinproducerandconsumersurplusesthatisidenticaltothewelfarelossfromtaxation.,EffectofPriceCeiling,Q1,Producersurplus,Consumersurplus,Deadweightloss,PriceFloors,Apricefloorisagovernment-setpriceaboveequilibriumprice.Itisataxonconsumersandasubsidytoproducers.Pricefloorstransferconsumersurplustoproducers.,EffectofPriceFloor,Q1,Producersurplus,Consumersurplus,Deadweightloss,TheDifferenceBetweenTaxesandPriceControls,Theeffectsoftaxationandpricecontrolsaresimilar.Theyaredifferentinthatpriceceilingscreateshortagesandtaxesdonot.Shortagesalsocreateblackmarkets.Bothtaxesandpricecontrolscreatedeadweightloss.,APriceCeilingwithForcedSupply,Thedraftisanexampleofapriceceilingwithforcedsupply.Thedraftisamilitaryconscriptionlawthatrequiresyoungmentoserveasetperiodoftimeinthearmedforcesatwhateverpaythegovernmentchooses.,APriceCeilingwithForcedSupply,Adraftmustbeimposedwhenthewageofferedbythearmyisbelowequilibriumsothatthequantityofsoldiersdemandedisbelowthequantitysupplied.,APriceCeilingwithForcedSupply,Thoseconscriptedareforcedtoacceptalowerwagethantheywouldotherwiseget,whichisatransferofsurplustothegovernment.,EffectofaDraftonSurplus,QS,QD=Draft,We,W0,Surplustransferredtothegovernment,Deadweightlosscausedbydraft,RentSeeking,Politics,andElasticities,Pricecontrolsreducetotalproducerandconsumersurpluses.Governmentsinstitutethembecausepeoplecaremoreabouttheirownsurplusthantheydoabouttotalsurplus.,Iffarmershaveit,theywantcropsubsidies.Ifconsumershaveit,theywantrentcontrols.,RentSeeking,Politics,andElasticities,Pricecontrolsexistbecauseofpoliticalpower.,Thisactivityiscalledrentseekinganefforttotransfersurplusfromonegrouptoanother.,RentSeeking,Politics,andElasticities,Anenormousamountoftimeandmoneyisspentinthepoliticalarenatoincreaseindividualssurplus.,Theyarguethatoftenwhenalltherentseekingandtaxconsequencesarenettedout,thereisnonetgaintothepublic.,RentSeeking,Politics,andElasticities,Publicchoiceeconomistsintegrateaneconomicanalysisofpoliticswiththeiranalysisoftheeconomy.,RentSeeking,Politics,andElasticities,Thereisagreaterincentiveforrent-seekingwhendemandandsupplyisinelastic.,InelasticDemandandIncentivestoRestrictSupply,Whendemandisinelastic,producershaveincentivestorestrictsupply.Farmingisanexample.,Sincefoodhasfewsubstitutes,itsdemandisinelastic.Inelasticdemandmeansthatpricesfallfasterthanariseinquantitysold.Revenuesfall,andfarmersareworseoff.,InelasticDemandandIncentivestoRestrictSupply,Advancesinfarmingproductivityincreasessupplybutatlowerprices.,InelasticDemandandIncentivestoRestrictSupply,Thereisanenormousincentiveforfarmerstoseekapricefloorfromgovernmentorthroughaproducercooperative.,InelasticDemand