Wk 3 – Critical Analysis Questions: Special Topic 1 – Government Spending and Ta

Government Spending and Taxation: Questions 2, 3, 4, 7.

2.  During the past five decades, there has been a shift in the compositi0on of the federal budget toward more spending on income transfers and health care and a smaller share for national defense.  Does economics indicate that this change will help Americans achieve higher living standards? Discuss.

3.  Because the structure of the personal income tax is progressive, a larger share of income is taxed at higher rates as real income increases.  Therefore, economic growth automatically results in higher taxes unless off-setting legislative action is taken.  Do you think this is an attractive feature of the current tax system? Why or why not?

4.  Compared with the situation before 1981, the marginal tax rates imposed on individuals and families with high incomes are now lower.  What was the top marginal personal income tax rate in 1980?  What is the top rate now?  Are you in favor of or opposed to the lower marginal rates? Why?

7.  Can democracy survive if a majority of citizenry pays little or nothing in taxes while benefiting directly from a higher level of government spending?  Why or why not? Discuss. 

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