1. Chapter 16 Public Finance: Expenditures and Taxes 1 Graphs and Tables Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Overview You are responsible for the entire chapter, but our focus will be on Taxes: – Kinds of taxes at which level of government – Tax Burden: the total costs that taxes impose on society – Tax Incidence: the degree to which a tax falls on a particular group 2

3. Federal Expenditures and Tax Revenues - 2009 3

4. State Expenditures and Tax Revenues - 2009 4

5. Local Expenditures and Tax Revenues - 2009 5

6. Tax Burden A tax is progressive if its average rate increases as income increases. A tax is regressive if its average rate declines as income increases. A tax is proportional if its average rate remains the same regardless of income. 6

7. Tax Burden: Applications Personal Income Tax Sales Taxes Corporate Income Tax Payroll Taxes (FICA) Property Taxes 7

8. Probable Incidence of U.S. Taxes Personal Income Tax Payroll Taxes Corporate Income Tax Sales and Excise Taxes Property Taxes 8

9. U.S. Tax Structure The Federal tax system is progressive. State and local tax structures are largely regressive. The overall U.S. tax system is progressive. 9