Chapter Questions
Consider the recent cuts in the federal personal income tax. What is the effect on income distribution? Do you believe this is fair? Why or why not?
Consider other proposals to replace the federal income tax structure with a flat rate tax structure or to replace the income tax with a national sales tax. How wouldthese actions affect income distribution? Do you agree with these proposals? Why or why not?
How do you feel about the elimination of the estate tax on extremely high values of inheritance? Why did the Bush administration refer to this tax as a "death tax"?
How do you feel about a reduction in the capital gains tax? An increase in the Earned Income Tax Credit? What is the effect of these on income distribution?
Should the Social Security tax be overhauled to reduce its regressivity? Why or why not? How might this be done?
Why does the government place excise taxes on goods such as cigarettes and alcohol? Is it because these products are "sinful"? (These taxes are often called "sin taxes.") Do you believe that excise taxes reduce consumption of these goods by very much? What does your response to the previous question imply regarding the amount of government excise tax revenue?
What sort of tax system do you feel is the fairest? What are the advantages and disadvantages of regressive, progressive, and proportional taxes?
What do you think of the European approach to encouraging conservation in gasoline use by imposing very large excise taxes on gasoline? Do you think this would work in the United States? Do you think it makes a difference if we are considering a short time period(such as two months) versus a longer time period (such as two years)? Why?
Visit the Census Bureau Web site (http://www.census. gov) to find current information on federal government spending and tax revenue. What is the major spending category? What is the major tax revenue source?
Visit the Treasury Bulletin Web site (http://www.fms. treas.gov/bulletin) to determine the current size of the budget deficit and of the national debt. How have these figures changed, if at all, from the data in this textbook?
Do you believe that the current budget deficit should be reduced? If so, how should it be done? Should taxes be increased? Should government spending be reduced? If so, which specific programs should be reduced?
Are you concerned about the national debt? Why or why not? Has your opinion changed as a result of what you have learned in this chapter? Has your opinion changed as a result of the large buildup of military expenditures related to the wars in Iraq and Afghanistan? Has your opinion changed as a result of the 2008-2009 recession and stimulus spending by government?