Week 3 Assignment

This paper will reflect answers to four of the seven critical analysis questions in Special Topic One, Government Spending and Taxation.

The first question states, “During the past five decades, there has been a shift in the composition of the federal budget toward more spending on income transfers and health care and a smaller share of national defense. Does economics indicate that this change will help Americans achieve higher living standards? Discuss” (Gwartney, Stroup, Sobel, Macpherson, 2013, p.412)

Yes, the government thinks by doing this the spending on the elderly will increase as the baby-boomers are in the retirement phase in the next two decades.

The second question states, “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 offsetting legislative action is taken. Do you think this is an attractive feature of the current tax system? Why or Why not?” (Gwartney, Stroup, Sobel, Macpherson, 2013, p.412)

I think this is an attractive feature of the current tax system; the offsetting legislative action that came from it was earned income tax credit. This has allowed the personal income tax of those persons in the bottom half of the income to pay a small percentage of the personal income tax. (Gwartney, Stroup, Sobel, Macpherson, 2013, p.405)

The third question states, “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?” (Gwartney, Stroup, Sobel, Macpherson, 2013, p.412)

The top marginal personal income tax rate in 1980 was 70%. The top marginal personal income tax rate now is 39.6%. (Gwartney, Stroup, Sobel, Macpherson, 2013, p.404) I am in favor of the lower...