2nd Mid-Term PBPL

Taxing System

Progressive Tax

When higher-income families pay a larger share of their incomes in taxes.

“Tax where a share of your income goes up as your income [increases].”

Proportional or “Flat” taxes

When the share of income paid in taxes is the same at all income levels, regardless of how much or how little households earn.

“Regardless of your income—you pay the same percentage of your income in TAX.”

Regressive Taxes

When low-income households pay a larger share of their incomes in taxes. Tabacco, alcohol.

“As your share of income goes up— the share of your income of taxes goes down.”

For example, Texas.

Lowest income people pay the higher share of their taxes.

Incidence Analysis

A technique for measuring who pays how much of an individual tax or all taxes in the system as a whole. w

Initial Incidence

Refers to who is legally obligated to pay a particular tax. Landlords bill the tenants through their monthly bill. 

Final Incidence

Measure how the impact of a tax is distributed in the economy. Tenants pay the tax to the Landlord on a monthly basis. 

Esther Duflo

MIT professor of Economics. Uses randomized control trials to run experiments about how to reduce poverty.

Cost-Benefit Analysis

Need to know the Facts. 

Change all things to a monetary 

Policy BASELINE

What would happen without a ban? 

Dicount Rate

Is the annual (%) rate at which we discount future costs and benefits.

The hihger the % discount rate, then lower is future value compared to current value.

Present Value

The present value of a future-received benefit (or cost) in today’s dollars.

Net Present Value

is the present value of all future benefits minus costs (NPV)

Fair Resource allocation according to Perry

All medical interventions are not of equal value and effectiveness in producing health, and therefore a prioritization process must be established to decide what will be financed with the public resources… change the way care is organized and delivered to reduce costs. 

Complex cost-benefit (page 242 Perry)

formulate were brough to bear, including an early form of QALYs (quality-adjusted life years), referred to in current documents as Healthy Life Years.

Cost-Benefit (Monotization required)

An analysis that shows NET BENEFITS of a project or THE BENEFIT to Cost RATIO

Requiring:

Provides a measure of policy EFFICIENCY

Applied to every major policy:

Identifies waste resources

Most efficient pathways

Identifies impacts on different grousp (input into equity considerations)

Benefits are required to be MONOTIZED

Cost Effectiveness

Measures benefits but Does NOT monetize them

Difficult to Monotize, hence they RANK:

Value of a life saved

value of a clear view

Value of reducing poverty

Randomize control trial is the best method

To IDENTIFY the given treatement, and clearly demonstrate a difference beteween the control group and the treated group.

Personal Income Tax

Goes to the state general fund— it goes directly to state funds and its operations.

Corporate Income Tax

State general fund and funds state operations

Property Tax

Goes to counties in which it is collected, supports schools primarily

Sales Tax

Split between state, counties, and cities

Vertical Equity

Incomes levels usually measured by “quintiles” of income.

Not measured by Dollars of taxes, but by SHARE of INCOME PAID in taxes.

Horizontal Equity

Taxes are distributed in the same INCOME QUINTILE despite difference of income.