ECON 369 - Public Sector Economics

In Class Exercise Nine - Tax Analysis - (General)

1.  Why do taxes exist (three reasons here)?

2.  Classify each of the following taxes in terms of:

direct (D) vs. indirect (I)

general (G) vs. selective (S)

a.  state sales tax -

b.  excise tax on cigarettes -

c.  state income tax -

d.  head tax -

e.  corporate income tax -

3.  Economists like to classify taxes in terms of the economic activity on which the tax is levied.  The head tax is often used for comparison purposes when two taxes are compared with respect to how economic activity might change with a tax.  Why is the head tax a good tax to use for comparison?

4.  What are the five basic areas we discussed regarding the criteria for judging a tax?  Which do you think is most important and why?

5.  Choose two of the first 10 questions we discussed regarding judging a tax -- the two that you think are the best questions to ask when judging a tax and then explain why you think they are the most important criteria?

6.  What was Buchanan's main point when looking at the institutions regarding taxing and spending?  Explain.

7.  Do you have any other questions over this material?