Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 12 - Part IV - The Design of the Tax System - Problems and Applications - Page 254: 2

Answer

a) The change is more attributable to changes in state and local government. b) Individual income taxes have increased in importance, and companies and Social Security paid a lower percentage in taxes. c) Transfer payments have increased, and purchases of goods and services have also increased.

Work Step by Step

a) Using table B-21 of the 2018 Economic Report, we find the federal government had receipts of 2,068.2 billion dollars and the state and local governments had receipts of 1,303.1 billion dollars (both in 2000). In the same table, for 2010, the federal government and state and local governments had receipts (respectively) of 2,443.3 billion dollars and 1,998.5 billion dollars. While the federal government had an increase of 18.1% from 2000 to 2010 (in terms of receipts), the state and local governments had an increase of 53.4% from 2000 to 2010 (in terms of receipts). b) Using table B-21 of the 2018 Economic Report, for the year 2005, individuals contributed 927.2 billion dollars, firms paid 278.3 billion dollars, and Social Security contributed 794.1 billion dollars. (There were other taxes of 154 billion paid, so the total paid in taxes was 2,153.6 billion dollars). From the same table, in 2015, individuals paid 1,540.8 billion dollars, firms paid 343.8 billion dollars, and Social Security paid 1,065.3 dollars. (Additional taxes were paid in the amount of 300 billion dollars, so the total paid in taxes was 3,249.9 billion dollars.) The following percentages were the percentages of how much each category of tax made up in 2005 (and in 2015, in parentheses): individuals--43.05% (47.41%), firms--12.92% (10.58%), Social Security--36.87% (32.78%), and other--7.16% (9.23%).
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