public finance (2)1 2 economic effects of direct taxes the net income of workers will ________. some...
TRANSCRIPT
Public Finance (2) 1
Public Finance (2) 2
Economic effects of direct taxes
The net income of workers will ________. Some workers will prefer _______ to work.
Labour supply will _______.
decreaseleisure
decrease
1. An increase in income tax rate
Effect on working incentive
Effect on consumption and general price level
People’s ________________ will be lower. They will reduce their ___________, leading to a lower _______________.
disposable incomeconsumption
standard of living
Since people’s demand for goods and services ________, the general price level will ____.decreases fall
Public Finance (2) 3
Economic effects of direct taxes
As the ________ from investment is lower, producers’ incentive to invest will ____.
Investment will ________.
net profitfall
2. An increase in profit tax rate
Effect on investment incentive
As profit is an important source of capital, producers’ ability to invest will ____.
decrease
fall
The reward for my hard work!
Government
Retained profit for investment
Public Finance (2) 4
Economic effects of direct taxes
Landlords’ _________ from property will be lower.
The demand for property will ________ and investment in property will ____.
net income
3. An increase in property tax rate
Effect on real estate business
Their incentive for investing in property will ________.
decrease
decrease
fall
Public Finance (2) 5
Economic effects of direct taxes
Under a progressive tax system, the high-income group have to pay a _______________ of their income as tax than the low-income group.
The income gap between the high-income group and the low-income group will be ________.
higher percentage
4. Income tax system
Effect on income inequality The income of the
high-income group will drop relatively _____ than the low-income group.more
narrowerThe rich The poor
Tax
Tax
Public Finance (2) 6
Economic effects of indirect taxes
The price of taxed goods will _______. increase
Sales tax
Effect on consumption pattern
Consumers will buy less / more of taxed goods and less / more of non-taxed goods.
Red wine$1,200
tax included
Public Finance (2) 7
Economic effects of indirect taxes
The price of taxed goods will _______. increase
Sales tax
Effect on resource allocation
Consumers will buy less / more of taxed goods.
Producers will produce less / more of taxed goods.Resource will be diverted from ______ goods to _________ goods.
taxednon-taxed
I will produce less Good X!
I will produce more Good Y!
Company X Company Y
Public Finance (2) 8
Economic effects of indirect taxes
Since producers will try to pass the _________ to consumers, the price of taxed goods will _______.
tax burden
Sales tax
Effect on price levels As the prices of taxed goods are included in the
__________________, the general price level will _______.
increase
consumer price indexincrease
General price level
Time
Public Finance (2) 9
Economic effects of indirect taxes
Sales tax is a progressive / regressive tax.
Sales tax
Effect on income distribution
The income gap between the high-income group and low-income group will be ________.
The low-income group have to pay _____________ sales tax than the high-income group.relatively more
widened
Public Finance (2) 10
Suppose the government imposes a sales tax on a per unit basis and increases the proportional income tax rate. What are the overall effects on the price level?
Quiz
An increase in income tax will reduce ___________ income.disposable
People will then decrease _____________ and the __________________ will fall.
consumption
general price level
A sales tax will reduce / increase general price level.
The overall effect on price level is __________, depending on the ______________ of the above two forces.
uncertainrelative strengths
Public Finance (2) 11
Suppose the government imposes a sales tax on a per unit basis and increases proportional income tax rate. What are the overall effects on the income distribution?
Quiz
After the increase in proportional income tax, the high-income group will pay a higher / a lower / the same percentage of their income as tax compared with the low-income group.
The income gap will be _______.
Since sales tax is __________, the low-income group pays ______________ income as tax than the high-income group.
regressiverelatively more
widened
Public Finance (2) 12
End