Scot Wick Blog

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System  Section 8 of 22 … Figure 2 – The Demographic and Fiscal Challenge Panel (a) shows the U.S. population age 65 and older as a percentage of the population age 20 to 64. Panel (b) shows government spending on Social Security, Medicare, and Medicaid as a percentage of GDP. The projection for future years assumes no change in current law. Unless changes in benefits are enacted · government spending on these programs will rise significantly · large tax increases will be required to pay for them … Long-term projections of the U.S. federal government's budget show as years go by the government will spend substantially more than it will receive in tax revenue. One reason for the rise in government spending is the elderly are a growing percentage of the overall population.   They receive Social Security and Medicare bene...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System Section 7 of 22 … Table 4 shows spending of the federal government in 2007. Total spending was $2,730 billion, or $9,040 per person on average. Social Security is largest spending category, this is mostly transfer payments to those age 62 and up. A transfer payment is a government transfer of money, as opposed to a government payment made in exchange for a good or service. … National defense is the second largest category, including military personnel salaries and purchases of military equipment. Defense spending rose from 17% to 20% from 2001 to 2007, in part because of the wars in Iraq and Afghanistan. … Medicare is the federal government's healthcare insurance program for those age 65 and up. … Income security, transfer payments to poor families, programs include · Temporary Assistance for Needy Families (TANF), often...

  Impact of Taxes on Businesses and Workers First, watch this short video. https://www.youtube.com/watch?v=1H5uU_6Ax_4 … Mostly summarized from Greg Mankiw’s Principles of Economics 5th Ed., chapter 6. Per Figure 8: At original equilibrium point C: · wage paid by firms and received by workers is F · quantity of workers employed is Q · total wages paid by firms and net wages received by workers are area FCQ0 … When the payroll tax AE is levied, there are three ways to pay the tax: 1-entire tax is levied on firms 2-entire tax is levied on workers 3-tax is levied half each on firms and workers … -1-Entire tax is levied on firms a· firms pay E wages to workers b· firms pay all AE taxes c· because of higher total cost A, firms demand fewer workers Q1 d· because of lower net wages E, workers supply less labor Q1 … -2-Entire tax is levied on workers a· firms pay A wages to workers b· workers pay all AE taxes c· because of higher total cost A, firms demand fewer workers Q1 d· because of lo...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System Section 6 of 22 … Per table 2, next biggest tax after individual income taxes are payroll taxes. Payroll taxes are also called social insurance taxes because this revenue pays for Social Security and Medicare. Social Security is the federal government program mostly for paying pensions to those age 62 and older. Medicare is the federal healthcare program for those aged 65 and older. … Corporate income tax generates about 14% of federal government tax receipts. Government taxes corporations on their profits. Corporate profits are taxed twice · first, as corporate income tax on corporation profits · second, dividends from profits sent to shareholders are taxed as individual income In 2003 the tax rate on dividend income was reduced to 15%. One reason for this was to compensate for this double taxation. … The last “other” t...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System Section 5 of 22 … Table 3 is a table of marginal tax rates. With this a taxpayer making a $30,000 income pays · 10% on the first $7800 = $780 · 15% on the rest $22,200 = $3300 · For a total of $4110 total income tax paid … Taxable income is net income after tax deductions such as for dependent children and giving to charities. Individual income tax amount to be paid is calculated using a schedule such as Table 3. Table 3 shows marginal tax rates, the income tax rate applied to each additional dollar of income. The marginal tax rate rises as income rises. Those with higher income pay an increasingly larger percentage in taxes. … Note each tax rate applies only to income within a range, not to a person's entire income. A person with an income of $1 million pays 35% on all income over $349,700. This system of applying incre...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System Section 4 of 22 … Of the taxes collected in the U.S. economy · federal government collects about two-thirds · state and local governments collect the other third Table 2 shows for year 2007, federal government tax categories and revenues collected in each · total receipts were $2,568 billion · U.S. population in 2007 was 302 million · the average American paid $8,503 in taxes to the federal government … The largest source of revenue for the federal government is the individual income tax. Every year each American individual or family fills out a tax form to determine how much tax it owes on income from all sources, including · work wages · profits from any small businesses · interest on savings · dividends from shares of corporations it owns The amount of income tax paid is not simply a flat percentage of its total incom...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 12 of 36 The Design of the Tax System  Section 2 of 22 … In 1789 and for the next hundred years the average American paid less than five percent of his income in taxes. Today, all taxes taken are about a third of the average American's income, including · personal income taxes · payroll taxes · sales taxes · property taxes · corporate income taxes Taxes are required because government must provide various goods and services. … Restated from Chapter 1, the Ten Principles of Economics: 1: people face trade-offs 2: the cost of something is what you give up to get it 3: rational people think at the margin 4: people respond to incentives 5: trade can make everyone better off 6: markets are usually a good way to organize economic activity 7: governments can sometimes improve market outcomes 8: a country's standard of living depends on its ability to produce go...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 4 The Economics of the Public Sector Chapter 11 of 36 Public Goods and Common Resources Section 13 of 13 … When Europeans first came to North America, more than 60 million bison roamed the continent. Hunting the bison was very popular during the 1800s and by 1900 the bison population had fallen to only about 400. Finally, government intervened to prevent species extinction. The elephant in some African countries today are threatened with extinction, as poachers kill for ivory. Not all animals with commercial value face this threat. The cow is a valuable source of food. There is no concern the cow will soon be extinct. The great demand for beef ensures cows will continue to thrive. … Why does the commercial value of ivory threaten the elephant, while the commercial value of beef guards the cow? This is because elephants are mostly a common resource, whereas cows are a private good. Elephants roam f...