POLS 207 1st Edition Lecture 8Outline of Last Lecture I. Tax Effort Vs. Tax Burden II. Taxes have shifted over the years III. State Revenue and Expenditures IV. State and Local Government Revenue Sources V. State and Local Government Expenditures VI. State Government Revenue from Own Sources VII. State Government Revenue Overview VIII. The Budget IX. Tax Models Outline of Current Lecture I. Taxes II. Taxes Overview III. Limitations on Texas State Taxing and Spending IV. Equity V. State and Local Borrowing Current LectureI. Taxes a. Revenue = Base * Rate i. Base – assets, income ii. Rate – percentage b. Tax rate i. Progressive 1. Larger percentage from high-income individuals than low-income ii. Fixed or Flat 1. Same percentage from everyone c. Tax Incidence i. Division of a tax burden between buyers and sellers ii. Including tax shifting iii. Progressive 1. Reduced tax incidence on low-income iv. Neutral 1. Neither reduced on low income or high income v. Regressive 1. Higher tax incidence on those who use services These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.d. Income Tax i. Base – income subject to taxation ii. Rate – fixed or progressive iii. Incidence – fixed or progressive e. Sales Tax i. Base – sales subject to taxation ii. Rate – fixed iii. Incidence – regressive f. Property Tax i. Base – property subject to taxation ii. Rate – fixed iii. Incidence – regressive II. Taxes Overview Chart Property Tax Sales Tax Income TaxBase Being Taxed Wealth Consumption IncomePrimary User Local Government State Governments Federal Gov’tComplianceWorkloadGovernmentassesses property,determines tax billsand collects taxesRetailer vendorsreport sales,determine tax billsand collect taxesTaxpayers reportincome, determinetax bills andsubmit taxesTax Rate Flat Flat Progressive or FlatTax Incidence Regressive RegressiveProgressive,Neutral, orRegressiveIncomePredictabilityHighest Lowest MiddleVisibilityVisible to propertyownersLeast visible Partly visibleAge Cohort TaxBurdenOlder taxpayersYounger more thanolderYounger taxpayersPoliticsPreferred bynonpartisan localgovernmentsPreferred byRepublicans as a“use tax.”Preferred byDemocrats as an“ability to pay” taxIII. Limitations on Texas State Taxing and Spending a. Pay as you go b. Growth limits on some appropriationsc. Welfare spending limit d. Debt limit e. Income tax prohibited IV. Equity a. Get what you pay for b. Pay for what you get c. Governments borrow money to achieve the goal of equity i. Goods ii. People iii. Time V. State and Local Borrowing a. Linked to capital goods b. Separate capital budget c. Reflected in operating budget TEST ON TUESDAY, FEBRUARY