Government Finance by mikesanye

VIEWS: 10 PAGES: 72

									dpq
                   1787
We the People of the United States, in Order
to form a more perfect Union, establish
Justice, insure domestic Tranquility, provide
for the common defence, promote the general
Welfare, and secure the Blessings of Liberty to
ourselves and our Posterity, do ordain and
establish this Constitution for the United
States of America.
 Mallory Reports

Honesty of U.S. businesses
        Some of our new banks
• New Leaf
• Bank of Miranda, Bank of Santi, Bank of
  Mallory, Bank of Marissa, Bank of Ian Swaby
• Sarah’s Bank of Seashells
• Union Bank
• Bank of the Future
• SIBL
• JG’s
Government Finance
Government Finance

    …it’s gonna
    be painful
What’s Dr. S. saying in this
        chapter?
         Government Finance
• Decisions governments make affect the
  economy as a whole by changing incentives
          Government Finance
• Decisions governments make affect the
  economy as a whole by changing incentives
• Heavily taxed activities, products, localities,
  industries or people react accordingly… move
  elsewhere, convert money to alternate uses,
  not work as hard, illegal behavior (avoiding
  taxes)
         Government Finance
• Manner in which government acquires its $
  also affects economy
         Government Finance
• Manner in which government acquires its $
  also affects economy
• How does government get its dough?
         Government Finance
• Manner in which government acquires its $
  also affects economy
• How does government get its dough?
• Taxes, bonds, sale of goods and services and
  the good old printing press
         Government Finance
• Manner in which government acquires its $
  also affects economy
• How does government get its dough?
• Taxes, bonds, sale of goods and services and
  the good old printing press
• Each of which has its own consequences, no
  matter what the intent
            Couple of terms
• Balanced budget:
            Couple of terms
• Balanced budget: if all current government
  spending is paid for with money received from
  taxes
            Couple of terms
• Balanced budget: if all current government
  spending is paid for with money received from
  taxes
• Budget surplus:
            Couple of terms
• Balanced budget: if all current government
  spending is paid for with money received from
  taxes
• Budget surplus: a hypothetical status whereby
  current tax receipts exceed current spending
             Couple more terms
• Deficit:
          Couple more terms
• Deficit: the preferred way to govern in 2011
  whereby tax receipts don’t even come close to
  covering current expenses so gap is closed by
  bonds and printing press
          Couple more terms
• Deficit: the preferred way to govern in 2011
  whereby tax receipts don’t even come close to
  covering current expenses so gap is closed by
  bonds and printing press
• National debt:
          Couple more terms
• Deficit: the preferred way to govern in 2009
  whereby tax receipts don’t even come close to
  covering current expenses so gap is closed by
  bonds and printing press
• National debt: the accumulation of those
  deficits over time, or the total amount owed
  by the national government
$14,135,932,295,120.09
       $14,135,932,295,120.09
• The estimated population of the United States
  is 310,416,409
  so each citizen's share of this debt is
  $45,582.68
       $14,135,932,295,120.09
• The estimated population of the United States
  is 310,416,409
  so each citizen's share of this debt is
  $45,582.68
• The National Debt has continued to increase
  an average of
  $4.1 billion per day since September 28, 2007
Taxation
                     Taxes
• All that governments control is tax rates
                     Taxes
• All that governments control is tax rates
• Increases in tax rates don’t necessarily
  translate to increased taxes
                     Taxes
• All that governments control is tax rates
• Increases in tax rates don’t necessarily
  translate to increased taxes
• Our old friend the Laffer Curve
                   Taxes
• All that governments control is tax rates
• Increases in tax rates don’t necessarily
  translate to increased taxes
• Our old friend the Laffer Curve
• CBO has been very wrong about impacts of
  tax increases and decreases
                   Taxes
• All that governments control is tax rates
• Increases in tax rates don’t necessarily
  translate to increased taxes
• Our old friend the Laffer Curve
• CBO has been very wrong about impacts of
  tax increases and decreases
• Key point: tax rates change behavior
           Couple more terms
• Regressive tax:
           Couple more terms
• Regressive tax: one that affects lower income
  people disproportionally
           Couple more terms
• Regressive tax: one that affects lower income
  people disproportionally
• Example?
          Couple more terms
• Regressive tax: one that affects lower income
  people disproportionally
• Example? Sales tax get a higher percentage of
  income from low-income people. Social
  Security tax also is regressive because the
  7.65% tax stops after $106,800 earned (most
  of it)
          Couple more terms
• Regressive tax: one that affects lower income
  people disproportionally
• Example? Sales tax get a higher percentage of
  income from low-income people. Social
  Security tax also is regressive because the
  7.65% tax stops after $106,800 earned (most
  of it)
• But it get worse: employer pays another equal
  amount
             Still more terms
• Progressive tax:
              Still more terms
• Progressive tax: a tax that hits the higher
  income people disproportionally
             Still more terms
• Progressive tax: a tax that hits the higher
  income people disproportionally
• Examples: income tax with higher marginal
  rates
             One more term
• Hypocrite: a politician who loves taxing and
  spending but is greedy with their own
             One more term
• Hypocrite: a politician who loves taxing and
  spending but is greedy with their own
• President Obama: 2003 income of $238,000…
  contributions to charity/religious
  organizations, $3,400 (1.4%)
             One more term
• Hypocrite: a politician who loves taxing and
  spending but is greedy with their own
• President Obama: 2003 income of $238,000…
  contributions to charity/religious
  organizations, $3,400 (1.4%)
• Vice President Biden: 2007 income of
  $319,853… contributions $995 (0.0000001%,
  estimated)
                Other taxes
• Most states (all but Alaska, Florida, Nevada,
  South Dakota, Texas, Washington, Wyoming)
  and many cities also tax your income
                Other taxes
• Most states (all but Alaska, Florida, Nevada,
  South Dakota, Texas, Washington, Wyoming)
  and many cities also tax your income
• Worst tax states (hall of shame for combined
  state and local taxes): New Jersey (12.2%),
  New York (12.1%), Connecticut, Wisconsin,
  Rhode Island, California, Minnesota, Vermont,
  Maine
Where’s Florida?
         Where’s Florida?
• 31st
             Where’s Florida
• 31st
• Lowest tax state?
             Where’s Florida
• 31st
• Lowest tax state?
• Alaska, 6.3%
     What?? Another term????
• VAT:
     What?? Another term????
• VAT: value added tax
      What?? Another term????
• VAT: value added tax
• Big in Europe: a tax imposed on things as they
  move through the supply chain; an indirect tax
  in that consumers don’t see the impact of the
  tax when they make a purchase even though
  something has been hammered each step of
  the way
              Dr. S. Theorem
“The less visible a tax is, the more revenue that
  can be collected without resistance or
  electoral retribution…”
  Our old buddies, government bonds

• What a bond?
  Our old buddies, government bonds

• What a bond? A bond is a legal obligation to
  pay a fixed amount of $ on a fixed date, a way
  for governments to borrow
  Our old buddies, government bonds

• What a bond? A bond is a legal obligation to
  pay a fixed amount of $ on a fixed date, a way
  for governments to borrow
• 47% of the U.S. debt (bonds) is held by
  foreigners, primarily China and Japan
  Our old buddies, government bonds

• What a bond? A bond is a legal obligation to
  pay a fixed amount of $ on a fixed date, a way
  for governments to borrow
• 47% of the U.S. debt (bonds) is held by
  foreigners, primarily China and Japan
• “Future generations of Japanese or Chinese
  will be able to collect wealth from future
  generations of Americans…”
What will you look like when you’re my
                 age?
What will you look like when you’re my
                 age?
    Charges for goods & services
• Mass transit:
    Charges for goods & services
• Mass transit: formerly run privately, now
  almost universally nationalized, i.e., subsidized
  and run by highly compensated government
  employees
    Charges for goods & services
• Mass transit: formerly run privately, not
  almost universally nationalized, i.e., subsidized
  and run by highly compensated government
  employees
• Why so inefficient?
    Charges for goods & services
• Mass transit: formerly run privately, not
  almost universally nationalized, i.e., subsidized
  and run by highly compensated government
  employees
• Why so inefficient? Lack of incentives for
  government to be efficient
       Stop with the terms!!!!!
• Entitlements:
        Stop with the terms!!!!!
• Entitlements: spending that is beyond the
  control of government officials once it’s law…
  such as unemployment, government worker
  retirements, Social Security
        Stop with the terms!!!!!
• Entitlements: spending that is beyond the
  control of government officials once it’s law…
  such as unemployment, government worker
  retirements, Social Security
• Over half of the U.S. budget is for entitlement
  programs
        Stop with the terms!!!!!
• Entitlements: spending that is beyond the
  control of government officials once it’s law…
  such as unemployment, government worker
  retirements, Social Security
• Over half of the U.S. budget is for entitlement
  programs
• President Obama has vastly expanded
  entitlements, as did Bush 43
         Cost vs Expenditures
• Government programs are rarely discussed in
  terms of overall cost to economy
          Cost vs Expenditures
• Government programs are rarely discussed in
  terms of overall cost to economy
• Good example: people complain about the
  cost of imprisoning people, but the cost of the
  criminals committing crimes would be a much
  great impact on the economy
      Assignment for March 15
• Read the 27 amendments to the Constitution

								
To top