POLI 365 1nd Edition Lecture 14 Outline of Current Lecture I. Criteria to Evaluate TaxesII. Major State and Local TaxesIII. State and Local Government Spending IV. Government Influence on Economy Current LectureI. Criteria to Evaluate Taxes a. Equity: burden of the revenue source according to ability to payi. Regressive: the more money you make, the less taxes you pay ii. Progressive: the more money you make, the more taxes you payiii. Proportionate b. Yield: how much money does it bring in; relates to efficiencyc. Elasticity: how does the revenue source vary with the economy? d. Political Accountability: how much can tax payers see/observe changes?e. Political Acceptability: how much do tax payers mind paying?f. Ease of Administration: how easy is it to apply this tax? How easy is it to understand this tax?i. Simple to compute and understand? 1. Is it simple such as the sales tax2. Is it complex such as the income tax/property taxii. Easy to apply and non-arbitrary? II. Major State and Local Taxes a. Property Taxi. Mostly utilized by local government b. Income Tax i. Mostly utilized by state government, although local government taxation on income is an option in 18 states ii. 7 states have no personal income tax (AK, FL, NV, SD, TX, WA, WY) c. Sales Taxi. Mostly utilized by state government, although local government taxation on sales is an option in 38 states 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.ii. The rates vary from 8.25% in CA to 0% in DE, MT, NH, and ORiii. Sales tax brings in less revenue than it used to 1. Services traditionally not covered (haircuts, getting your nails done)2. Internet sales d. Severance Taxi. Applies to the severing (removal) of a natural resource from its environment. Applies to things such as oil, coal, minerals, natural gas, etc. In Alaska, this tax makes up 85% of state revenues. It may also help pay for environmental damages. ii. The big disadvantage is that these resources are nonrenewable, so this tax will not last forever e. User Feesi. Mostly utilized by local governmentsii. Water sewage, garbage collection, transit fees, toll roads, airport landing fees, parking meters, hunting licenses, fishing licenses, admission to parks, zoos, and museums f. Cigarette Tax, Beer Tax, Gasoline Tax III. State and Local Government Spending a. State Spendingi. Welfare: unemployment, food stamps, TANF, Medicaid, WICii. Education: higher educationiii. Insurance Trust: retirement and health benefits for current and former state employees b. Local Government Spendingi. Education: K-12 IV. Government Influence on Economy a. Monetary Policy: things that affect the amount of money circulating at the time. Government affects these through interest rates, etc. This is the most effective way to stimulate or reign in the economy. This is limited only to the federal government. b. Fiscal Policy: refers to the practice of taxing and spending i. General spending of the government 1. Keynesian Economics: spending money to stimulate the economy2. States have to run a balanced budget, so they can’t really practicespending money to stimulate the economy. Instead, they can spend on specific things:ii. Targeted spending and taxes 1. Increasing business growth and citizen attraction through improving infrastructure (roads, ports, airports), educatingworkforces, improving amenities, transportation quality, adding museums, parks etc. c. Regulatory Policy: regulations on individuals and private