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A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to collectively fund government spending, public expenditures, or as a way to regulate and reduce negative externalities. Tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax relief. The first known taxation took place in Ancient Egypt around 3000–2800 BC. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent.
William Spencer Vickrey was a Canadian-American professor of economics and Nobel Laureate. Vickrey was awarded the 1996 Nobel Memorial Prize in Economic Sciences with James Mirrlees for their research into the economic theory of incentives under asymmetric information, becoming the only Nobel laureate born in British Columbia.
In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's activity. Externalities can be considered as unpriced components that are involved in either consumer or producer market transactions. Air pollution from motor vehicles is one example. The cost of air pollution to society is not paid by either the producers or users of motorized transport to the rest of society. Water pollution from mills and factories is another example. All (water) consumers are made worse off by pollution but are not compensated by the market for this damage. A positive externality is when an individual's consumption in a market increases the well-being of others, but the individual does not charge the third party for the benefit. The third party is essentially getting a free product. An example of this might be the apartment above a bakery receiving some free heat in winter. The people who live in the apartment do not compensate the bakery for this benefit.
Joseph Eugene Stiglitz is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is a former senior vice president and chief economist of the World Bank. He is also a former member and chairman of the Council of Economic Advisers. He is known for his support for the Georgist public finance theory and for his critical view of the management of globalization, of laissez-faire economists, and of international institutions such as the International Monetary Fund and the World Bank.
This aims to be a complete article list of economics topics:
A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it. It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.
Henry George was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the economic philosophy known as Georgism, the belief that people should own the value they produce themselves, but that the economic value of land should belong equally to all members of society. George famously argued that a single tax on land values would create a more productive and just society.
In economics, the fiscal multiplier is the ratio of change in national income arising from a change in government spending. More generally, the exogenous spending multiplier is the ratio of change in national income arising from any autonomous change in spending. When this multiplier exceeds one, the enhanced effect on national income may be called the multiplier effect. The mechanism that can give rise to a multiplier effect is that an initial incremental amount of spending can lead to increased income and hence increased consumption spending, increasing income further and hence further increasing consumption, etc., resulting in an overall increase in national income greater than the initial incremental amount of spending. In other words, an initial change in aggregate demand may cause a change in aggregate output that is a multiple of the initial change.
Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is considered to be threefold, consisting of governmental effects on:
- The efficient allocation of available resources;
- The distribution of income among citizens; and
- The stability of the economy.
Georgism, also called in modern times Geoism, and known historically as the single tax movement, is an economic ideology holding that people should own the value that they produce themselves, while the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society. Developed from the writings of American economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems, based on principles of land rights and public finance that attempt to integrate economic efficiency with social justice.
A Pigouvian tax is a tax on any market activity that generates negative externalities. The tax is normally set by the government to correct an undesirable or inefficient market outcome and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.
In economics, tax incidence or tax burden is the effect of a particular tax on the distribution of economic welfare. Economists distinguish between the entities who ultimately bear the tax burden and those on whom the tax is initially imposed. The tax burden measures the true economic effect of the tax, measured by the difference between real incomes or utilities before and after imposing the tax, and taking into account how the tax causes prices to change. For example, if a 10% tax is imposed on sellers of butter, but the market price rises 8% as a result, most of the tax burden is on buyers, not sellers. The concept of tax incidence was initially brought to economists' attention by the French Physiocrats, in particular François Quesnay, who argued that the incidence of all taxation falls ultimately on landowners and is at the expense of land rent. Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately suffers a loss from, the tax. The key concept of tax incidence is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply. As a general policy matter, the tax incidence should not violate the principles of a desirable tax system, especially fairness and transparency. The concept of tax incidence is used in political science and sociology to analyze the level of resources extracted from each income social stratum in order to describe how the tax burden is distributed among social classes. That allows one to derive some inferences about the progressive nature of the tax system, according to principles of vertical equity.
A Lindahl tax is a form of taxation conceived by Erik Lindahl in which individuals pay for public goods according to their marginal benefits. In other words, they pay according to the amount of satisfaction or utility they derive from the consumption of an additional unit of the public good. Lindahl taxation is designed to maximize efficiency for each individual and provide the optimal level of a public good.
Optimal tax theory or the theory of optimal taxation is the study of designing and implementing a tax that maximises a social welfare function subject to economic constraints. The social welfare function used is typically a function of individuals' utilities, most commonly some form of utilitarian function, so the tax system is chosen to maximise the aggregate of individual utilities. Tax revenue is required to fund the provision of public goods and other government services, as well as for redistribution from rich to poor individuals. However, most taxes distort individual behavior, because the activity that is taxed becomes relatively less desirable; for instance, taxes on labour income reduce the incentive to work. The optimization problem involves minimizing the distortions caused by taxation, while achieving desired levels of redistribution and revenue. Some taxes are thought to be less distorting, such as lump-sum taxes and Pigouvian taxes, where the market consumption of a good is inefficient, and a tax brings consumption closer to the efficient level.
Public economics(or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare. Welfare can be defined in terms of well-being, prosperity, and overall state of being.
The marginal cost of public funds (MCF) is a concept in public finance which measures the loss incurred by society in raising additional revenues to finance government spending due to the distortion of resource allocation caused by taxation. Formally, it is defined as the ratio of the marginal value of a monetary unit raised by the government and the value of that marginal private monetary unit. The applications of the marginal cost of public funds include the Samuelson condition for the optimal provision of public goods and the optimal corrective taxation of externalities in public economic theory, the determination of tax-smoothing policy rules in normative public debt analysis and social cost-benefit analysis common in practical policy analysis.
Taxation in Norway is levied by the central government, the county municipality and the municipality. In 2012 the total tax revenue was 42.2% of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes – in terms of revenue – are VAT, income tax in the petroleum sector, employers' social security contributions and tax on "ordinary income" for persons. Most direct taxes are collected by the Norwegian Tax Administration and most indirect taxes are collected by the Norwegian Customs and Excise Authorities.
Several theories of taxation exist in public economics. Governments at all levels need to raise revenue from a variety of sources to finance public-sector expenditures.
Optimal capital income taxation is a subarea of optimal tax theory which studies the design of taxes on capital income such that a given economic criterion like utility is optimized.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.
References
- ↑ Stiglitz, Joseph (1977). "The Theory of Local Public Goods". In Feldstein, M.S.; Inman, R.P. (eds.). The Economics of Public Services. Palgrave Macmillan, London. pp. 274–333. doi:10.1007/978-1-349-02917-4_12. ISBN 978-1-349-02919-8.
- ↑ Arnott, Richard J.; Joseph E. Stiglitz (Nov 1979). "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size". Quarterly Journal of Economics. 93 (4): 471–500. doi:10.2307/1884466. JSTOR 1884466. S2CID 53374401.
- ↑ George, Henry (1879). Progress and Poverty.
- ↑ Behrens, Kristian; Kanemoto, Yoshitsugu; Murata, Yasusada (Jan 2015). "The Henry George Theorem in a Second-Best World" (PDF). Journal of Urban Economics. 85: 34–51. doi:10.1016/j.jue.2014.10.002. S2CID 52904689.
- ↑ "Adequacy of Land as a Tax Base" (PDF). Archived from the original (PDF) on 2015-04-15. Retrieved 2018-08-29.
- ↑ Gaffney, Mason (2009). "The Hidden Taxable Capacity of Land: Enough and to Spare" (PDF).
- ↑ Foldvary, Fred (January 2006). "The Ultimate Tax Reform: Public Revenue from Land Rent". SSRN 1103586.
- ↑ Doucet, Lars (2021-12-09). "Does Georgism Work?, Part 1: Is Land Really A Big Deal?". Astral Codex Ten. Retrieved 2021-12-26.
- ↑ Kumhof, Michael; Tideman, T. Nicolaus; Hudson, Michael; Goodhart, Charles (2021-10-20). "Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land". Rochester, NY. SSRN 3954888.