Slides

1. POL 240-01
Fall 2015

4. GROSS DOMESTIC PRODUCT
(GDP)
 Total value of goods and
services produced in U.S.
 Measure of national
economy
 34% of all govt. spending
 State and local
governments spend
additional monies
GROSS STATE PRODUCT (GSP)
GROSS REGIONAL PRODUCT (GRP)
 Sum of all value added by
state-based industries
 Measure of state economy
 State/local expenditures
are mostly on education,
social services, public
safety, and transportation

8.  State and local governments benefit from
intergovernmental transfers
 Local governments rely heavily on states and
federal govt. for financial assistance
 State and local financial relations are closely
tied to national government

9.  Importance of Diversity
 Levels of Government andTheirTaxes
 IncomeTax (National Government)
 SalesTax (State Government)
 PropertyTax (Local Government)
 What is a tax burden?
 Taxes as percent of person’s income

11.  SalesTaxes
 Greatest source of revenue for state governments
 Affect poorer people, called regressive tax
 Everyday exception exemptions
 Decline due to Internet and service-oriented economy
 ExciseTaxes
 Examples of cigarettes and alcohol
 PropertyTaxes
 Bulk of local government revenue (75%)
 Creates disparity between richer and poorer areas

13.  IncomeTaxes
 21.5% of all state and local revenue
 Graduated income tax (progressive) or flat tax
 CorporateTaxes
 Tax on corporate net profits
 SeveranceTaxes
 Tax on natural resources in some states
▪ Minerals, natural gas, coal
 AK: Oil and gas taxes make up 50% of state revenue
 Popular with those with ample resources

14.  EstateTax
 Taxes levied on person’s estate or holdings after death
 GiftTax
 Taxes improved on money transfers during lifetime
 “Pole”Taxes
 Taxes imposed on strip clubs/escort services in Utah
 JockTax
 Pro athletes file and pay tax on games played in areas

16.  #1: Equity
 Taxes should be fair for all citizens
 Progressive, Regressive, and Proportional / FlatTaxes
 #2: Yield
 Evaluated on basis of efficiency
▪ Contributions vs. Efforts of Administration and Collection
 Depends on the tax base and rate
 #3: Elasticity
 Responsive to economy
 As per capita income grows, revenues should keep pace with tax increases.
 Tax reductions should equate with economic recessions and income
▪ Impact on Citizens’ Tax Rates

17.  #4: Political Accountability
 Personal tax increases should not be hidden
 Citizens should know how much they owe and when it
must be paid, etc.
 #5: Acceptability
 Type and mixture of taxes imposed should be
congruent with citizen preferences
 Large, one-time payments such as property taxes,
inflict more pain than smaller, frequently paid sales
taxes