Government Spending and
Taxation: Questions 2, 3, 4, 7.
2. During the past
five decades, there has been a shift in the compositi0on of the federal budget
toward more spending on income transfers and health care and a smaller share
for national defense. Does economics
indicate that this change will help Americans achieve higher living standards?
3. Because the
structure of the personal income tax is progressive, a larger share of income
is taxed at higher rates as real income increases. Therefore, economic growth automatically
results in higher taxes unless off-setting legislative action is taken. Do you think this is an attractive feature of
the current tax system? Why or why not?
4. Compared with the
situation before 1981, the marginal tax rates imposed on individuals and
families with high incomes are now lower.
What was the top marginal personal income tax rate in 1980? What is the top rate now? Are you in favor of or opposed to the lower
marginal rates? Why?
7. Can democracy
survive if a majority of citizenry pays little or nothing in taxes while
benefiting directly from a higher level of government spending? Why or why not? Discuss.