chapter 15: role of gov Flashcards
what are the sources of revenue for diff lvels of gov
state - tax ie GST and funding from the commonwealth gov
local - rates levied on local property owners and some from commonwelath and state grnats
what si the public sector
refers to
the parts of the economy
that are owned or
controlled by the
government. It includes
all tiers of the government
as well as government
business enterprises
what are two important indicators of the size of public sector
- public sector outlays(spending) as a % of GDP
- public sector employment as a % of total employment
what is total public sector outlays
shows the proportion of total annual expenditure by all lvls of gov compared with expenditure of eco as a whole
what si the tredn of total public sector outlays
Over time,
governments have tended to spend less on infrastructure, while spending more on social
welfare payments and community services such as health care –> transfer payemtns
Nevertheless, there are long-term pressures for
increased spending on health and aged care, with an ageing population, and increased
defence spending due to a changing security environment. In addition, sudden events such
as financial crises and pandemics can require large-scale government responses
what are direct and indirect taxes
gov uses indirect and direct taxes to achieve their resource allocation goals
direct - paid by the individuals or bus firms on which they are levied ie cant pass to someone else eg income tax, company tax and capital gains tax
indirect - levied on individuals and bus firm that can be passed onto someone else eg GST as its levied on seller but is usually passed on to the consumer
which type of tax do govs use
gov use indirect taxes on items such as tobacco and leaded petrol to divert resources away from the production of such goods
how do govs spend
used to directly reallocate resources to a particular sector of eco, or influence the decisions of consumers and buses (ultimately to redress failure in market to provide a resource)
eg:
- funding for the arts
- grants for start ups
- subsidies for telecomm
- cash payments to priv employment search buses
what was a disadv of gov providing important goods
in the late twentieth century, attitudes shifted and it was widely felt that governments
were inefficient in operating their enterprises, and that this inefficiency increased costs for consumers (no incentive to make profit) –> privatisation
what si the main way gov redistributes income
thru the taxtaion system and social welfare payments ie by taxing wealthiest groups more heavily and redis thru social welafre payments, inequality is drmaatically reduced
how doees tax play important role in distributing income
gov use tax as a tool to redis by taxing individuals at diff rates
tax terminology
- tax base: items that are taxed (3main - income, welath and consumption)
- avg rate of tax (ART): proportion of total income earned that is paid in the form of tax
- marginal rate of tax (MRT): proportion of any increase in come that must be paid as tax ie how many cents in every dollar earned that must be paid to gov
how the avg rate of tax changes as an ind income increases indicates whether tax is a:
- progressive tax: high income pay greater than low income (art rises as income increase) eg income tax
- regressive tax: low pay more than high (art falls as income increases) eg GST
- proportional tax: all income earners pay same (art constant) eg company tax
what is aus main intrument of taxation used to redistribute income
PAYG - tax payments deducted from employees’ wages and req almost immediate tax payments from self-employed and investors
what is the formula for art
tax payable over total income times 100
how is GST regressive tax
eg if u buy plane ticket for 200, gst is 10% ie 20$ therefore for someone earning 400 a week, its 5% of their income whereas for a person eanring 2000 its only 1%
