Chapter 19-Taxes on Consumption and Wealth Public economics
1 Chapter 19 – Taxes on Consumption and Wealth Public Economics
Introduction There is substantial dissatisfaction with the federal personal and corporate income tax systems One possibility is to adopt a consumption tax whose base is actual consumption Another possibility is a tax on wealth Whose base is accumulated saving
2 Introduction • There is substantial dissatisfaction with the federal personal and corporate income tax systems. • One possibility is to adopt a consumption tax whose base is actual consumption. Another possibility is a tax on wealth, whose base is accumulated saving
Retail sales Tax Several types on sales taxes levied on wide variety of commodities General sales tax impose the same tax rate on the purchase of all commodities Selective sales tax is levied at different rates on the purchase of different commodities Also known as excise tax or differential commodity tax
3 Retail Sales Tax • Several types on sales taxes levied on wide variety of commodities: – General sales tax impose the same tax rate on the purchase of all commodities. – Selective sales tax is levied at different rates on the purchase of different commodities. • Also known as excise tax or differential commodity tax
Retail sales Tax Table 19.1 shows tax revenue collected from various sales taxes Federal government levies no general sales tax. but does tax motor fuel alcoholic beverages, tobacco, and some other commodities Large majority of states have sales tax, with rates between 2.9% and 7.25%
4 Retail Sales Tax • Table 19.1 shows tax revenue collected from various sales taxes. • Federal government levies no general sales tax, but does tax motor fuel, alcoholic beverages, tobacco, and some other commodities. • Large majority of states have sales tax, with rates between 2.9% and 7.25%
Table 19.1 Table 19.1 State and local sales tax revenues by source (S billions) Source State Local General sales tax 164 S29.7 Motor fuel 29.2 0.8 Alcoholic beverages 3.9 0.3 Tobacco 8.2 0.2 Public utilities 8.9 7.3 Percent of own- 36.7% 100% source revenue from sales taxes SOURCE: US Bureau of the Census (2002, p. 270]. Figures are for 1999
Table 19.1