Tax policy
Encyclopedia
Tax policy is the government's approach
to taxation, both from the practical
and normative
side of the question.
or regressive
) and how they might affect individuals and businesses (i.e., tax incidence
).
The reason for such foitution effect]], because anything that does not change relative prices is nondistortionary. One must also consider the income effect
, which for tax policy purposes often needs to be assumed to cancel out in the aggregate. The efficiency loss is depicted on the demand curve and supply curve diagrams as the area inside Harberger's Triangle
.
National Insurance
in the United Kingdom
and Social Security
in the United States
are forms of social welfare funded outside their national income tax
systems, paid for through worker contributions, something labeled a stealth tax
by critics.
colonial America
, the argument "No taxation without representation
" resulted from the tax policy of the British
Crown, which taxed the settlers but offered no say in their government. A more recent American example is President George H. W. Bush
's famous tax policy quote, "Read my lips: no new taxes
."
Policy
A policy is typically described as a principle or rule to guide decisions and achieve rational outcome. The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol...
to taxation, both from the practical
Positive economics
Positive economics is the branch of economics that concerns the description and explanation of economic phenomena. It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories...
and normative
Normative economics
Normative economics is that part of economics that expresses value judgments about economic fairness or what the economy ought to be like or what goals of public policy ought to be....
side of the question.
Philosophy
Policymakers debate the nature of the tax structure they plan to implement (i.e., how progressiveProgressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...
or regressive
Regressive tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the...
) and how they might affect individuals and businesses (i.e., tax incidence
Tax incidence
In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that, at the end of the day, bears the burden of the tax...
).
The reason for such foitution effect]], because anything that does not change relative prices is nondistortionary. One must also consider the income effect
Income effect
In economics, the consumer's preferences, money income and prices play an important role in solving the consumer's optimization problem...
, which for tax policy purposes often needs to be assumed to cancel out in the aggregate. The efficiency loss is depicted on the demand curve and supply curve diagrams as the area inside Harberger's Triangle
Harberger's Triangle
Harberger's triangle, generally attributed to Arnold Harberger, refers to the dead weight loss associated with government intervention in a perfect market...
.
National Insurance
National Insurance
National Insurance in the United Kingdom was initially a contributory system of insurance against illness and unemployment, and later also provided retirement pensions and other benefits...
in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and Social Security
Social Security (United States)
In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance program.The original Social Security Act and the current version of the Act, as amended encompass several social welfare and social insurance programs...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
are forms of social welfare funded outside their national income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
systems, paid for through worker contributions, something labeled a stealth tax
Stealth tax
A stealth tax is a tax levied in such a way that is largely unnoticed, or not recognized as a tax,. The phrase was generally used in the United Kingdom by Conservatives to attack the New Labour government's behaviour...
by critics.
Administration
The implementation of tax policy has always been a tricky business. For example, in pre-revolutionaryAmerican Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...
colonial America
Colonial America
The colonial history of the United States covers the history from the start of European settlement and especially the history of the thirteen colonies of Britain until they declared independence in 1776. In the late 16th century, England, France, Spain and the Netherlands launched major...
, the argument "No taxation without representation
No taxation without representation
"No taxation without representation" is a slogan originating during the 1750s and 1760s that summarized a primary grievance of the British colonists in the Thirteen Colonies, which was one of the major causes of the American Revolution...
" resulted from the tax policy of the British
Kingdom of Great Britain
The former Kingdom of Great Britain, sometimes described as the 'United Kingdom of Great Britain', That the Two Kingdoms of Scotland and England, shall upon the 1st May next ensuing the date hereof, and forever after, be United into One Kingdom by the Name of GREAT BRITAIN. was a sovereign...
Crown, which taxed the settlers but offered no say in their government. A more recent American example is President George H. W. Bush
George H. W. Bush
George Herbert Walker Bush is an American politician who served as the 41st President of the United States . He had previously served as the 43rd Vice President of the United States , a congressman, an ambassador, and Director of Central Intelligence.Bush was born in Milton, Massachusetts, to...
's famous tax policy quote, "Read my lips: no new taxes
Read my lips: no new taxes
"Read my lips: no new taxes" is a now-famous phrase spoken by then presidential candidate George H. W. Bush at the 1988 Republican National Convention as he accepted the nomination on August 18. Written by speechwriter Peggy Noonan, the line was the most prominent sound bite from the speech...
."
See also
- Tax lawTax lawTax law is the codified system of laws that describes government levies on economic transactions, commonly called taxes.-Major issues:Primary taxation issues facing the governments world over include;* taxes on income and wealth...
- Citizens for Tax JusticeCitizens for Tax JusticeCitizens for Tax Justice is a non-profit research and advocacy think tank based in Washington, DC. CTJ’s work focuses primarily on federal tax policy...