Changing Tax: pressing reset on the UK’s tax base
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Macro 16
- 1. Lecture 16 Macroeconomics
- 2. Final Exam Wednesday June 27th Chapters 17- 21
- 3. Chapter 17 The Government Budget Taxes and Spending
- 4. Two Objectives Unemployment Inflation
- 5. Tax Revenues Income Taxes Social Security Taxes Other
- 6. Types Per Head Flat Regressive Progressive
- 7. Progressive The more you earn, the higher the rate
- 8. Types Income Sales VAT Property
- 9. Deficits and Debt Government Spending and Revenue
- 10. Deficit Spending greater than revenue
- 11. Balanced Budget Spending exactly equals revenues
- 12. Surplus Revenue greater than spending
- 13. Debt Accumulated deficits
- 14. Debt $15 trillion $45,455 per person
- 15. Why would you want government to go into debt? Don’t have to pay Future larger economy
- 16. Debt Investment Only if the return is higher than the interest rate
- 17. How to reduce deficits Higher taxes Lower spending
- 18. Entitlements Guaranteed benefits 1960 - 20% 2017 - 60%
- 19. Interest Expense $240 billion 2.0% current rate 6.2% historical 1962-2017
- 20. Solution to Debt Economic Growth
- 21. Spending Taxes Aggregate Demand Expand Increase Decrease Right Contract Decrease Increase Left Fiscal Policies
- 22. Chapter 18 Fiscal Policy
- 23. P2 Price Level Real GDP orY Increase Aggregate Demand Lower Taxes and/or Increase Spending 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment
- 24. P3 Price Level Real GDP orY Decrease Aggregate Demand Raise Taxes and/or Decrease Spending 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Inflation
- 25. Where does government get money? Crowding Out
- 26. More Taxes Cancel No effect
- 27. More Borrowing Crowding Out Increase interest rates
- 28. Lower Taxes People may just save more and not spend
- 29. More Spending Now get free stuff. No new spending
- 30. Get a free iPhone But your taxes will go up to pay for it No change in total spending
- 31. Tax Rate % $ Tax Revenue Laffer Curve 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dropped Top Marginal Income Tax Rate from 70% to 28%
- 32. Supply Side Tax Changes Lower marginal tax rates incentivize people to work more and firms to create more.
- 33. P4 Price Level Real GDP orY Fiscal Policy and Negative Supply Shock 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 P2 P3 Inflation and Recession Stagflation
- 34. P3 Price Level Real GDP orY Increase Long Run Aggregate Supply Lower Marginal Tax Rates 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Lower Prices Increase Output
- 35. Time Lags Do you really know? Congress approve Effect lag Take 1- 3 years Counterproductive
- 36. Multiplier May not be as large as Keynes calculated
- 37. Multiplier may not multiply
- 38. Automatic Stabilizers Job Unemployed Job Taxes Insurance Taxes
