 | Economics 14/e McConnell | |||||
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| Economics 14/e McConnell | |||||
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public choice theory
The economic analysis of collective and government decision making politics and the democratic process.
public finance
The branch of economics which analyzes government revenues and expenditures.
logrolling
The trading of votes by legislators to secure favorable outcomes on decisions concerning the provision of public goods and quasipublic goods.
paradox of voting
A situation whereby paired-choice voting by majority rule fails to provide a consistent ranking of society’s preferences for public goods or services.
median-voter model
The view that under majority rule the median (middle) voter will be in the dominant position to determine the outcome of an election.
public sector failure
Inefficiencies in resource allocation caused by problems in the operation of the public sector (government); occurs because of rent-seeking pressure by special-interest groups short-sighted political behavior limited and bundled choices and bureaucratic inefficiencies.
special-interest effect
Any result of government promotion of the interests (goals) of a small groups at the expense of a much larger group.
rent seeking
The actions by persons firms or unions to gain special benefits from government at the taxpayers’ or someone else’s expense.
benefits-received principle
The idea that those who receive the benefits of goods and services provided by government should pay the taxes required to finance them.
ability-to-pay principle
The idea that those who have greater income (or wealth) should pay a greater proportion of it as taxes than those who have less income (or wealth).
progressive tax
A tax whose average tax rate increases as the taxpayer’s income increases and decreases as the taxpayer’s income decreases.
regressive tax
A tax whose average tax rate decreases as the taxpayer’s income increases and increases as the taxpayer’s income decreases.
proportional tax
A tax whose average tax rate remains constant as the taxpayer’s income increases or decreases.
tax incidence
The person or group who ends up paying a tax.
efficiency loss of a tax
The loss of net benefits to society because a tax reduces the production and consumption of a taxed good below the level of allocative efficiency.
value-added tax (VAT)
A tax imposed on the difference between the value of the products sold by a firm and the value of the goods purchased from other firms to produce the product.
flat tax
The integration of personal and corporate income tax to alleviate the complexities, and high bureaucratic costs, of the current Federal tax system. Each taxpayer would first determine total wages and salary income and then subtract a large allowance for each family member. The remainder would be taxable income, which would be taxed at a rate of 20%. Proponents of the flat tax argue that it would result in a simplified, efficient tax system that would free up numerous valuable resources such as thousands of tax accountants, tax lawyers, tax preparers and IRS personnel. Society could then shift these resources to other areas. And because the flat tax would not be levied on capital gains or interest from savings, people would presumably save more and consume less. Finally, it is argued that this lower overall tax rate would stimulate economic growth through increased business profitability.
fallacy of limited decisions
The false notion that there are a limited number of economic decisions to be made so that if government makes more decisions there will be fewer private decisions to render.
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