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BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE SE THE DECLARATION IS RIGHT OR WRONG.
FIRST TEXT
The Theory of the Leisure Class
An economic mystery: Why do the poor seem to have more free time than the rich?
By Steven E. Landsburg
Article URL: http://www.slate.com/id/2161309/
(Posted Friday, March 9, 2007, at 1:23 PM ET)
As you've probably heard, there's been an explosion of inequality in the United States over the past four decades. The gap between high-skilled and low-skilled workers is bigger than ever before, and it continues to grow.
How can we close the gap? Well, I suppose we could round up a bunch of assembly-line workers and force them to mow the lawns of corporate vice presidents. Because the gap I'm talking about is the gap in leisure time, and it's the least educated who are pulling ahead.
In 1965, leisure was pretty much equally distributed across classes. People of the same age, sex, and family size tended to have about the same amount of leisure, regardless of their socioeconomic status. But since then, two things have happened. First, leisure (like income) has
increased dramatically across the board. Second, though everyone's a winner, the biggest winners are at the bottom of the socioeconomic ladder.
To quantify those changes, you've got to decide exactly what leisure means. You can start by deciding what it's not. Surely working at your desk or on the assembly line is not leisure. Neither is cleaning or ironing. But what about standing around the water cooler, riding the train to work, gardening, pet care, or tinkering with your car? What about playing board games with your children?
Those are judgment calls, but it turns out not to matter very much what calls you make. When professors Mark Aguiar and Erik Hurst combined the results of several large surveys (including studies where randomly chosen subjects kept detailed time diaries), they found that by any definition, the trends are clear.
In 1965, the average man spent 42 hours a week working at the office or the factory; throw in coffee breaks, lunch breaks, and commuting time, and you're up to 51 hours. Today, instead of spending 42 and 51 hours, he spends 36 and 40. What's he doing with all that extra time? He spends a little on shopping, a little on housework, and a lot on watching TV, reading the newspaper, going to parties, relaxing, going to bars, playing golf, surfing the Web, visiting friends, and having sex. Overall, depending on exactly what you count, he's got an extra six to eight hours a week of leisure—call it the equivalent of nine extra weeks of vacation per year.
For women, time spent on the job is up from 17 hours a week to 24. With breaks and commuting thrown in, it's up from 20 hours to 26. But time spent on household chores is down from 35 hours a week to 22, for a net leisure gain of four to six hours. Call it five extra vacation weeks.
A small part of those gains is because of demographic change. The average American is older now and has fewer children, so it's not surprising that he or she works less. But even when you compare modern Americans to their 1965 counterparts—people with the same family size, age, and education—the gains are still on the order of 4 to 8 hours a week, or something like seven extra weeks of leisure per year.
But not for everyone. About 10 percent of us are stuck in 1965, leisurewise. At the opposite extreme, 10 percent of us have gained a staggering 14 hours a week or more. (Once again, your gains are measured in comparison to a person who, in 1965, had the same characteristics that you have today.) By and large, the biggest leisure gains have gone precisely to those with the most stagnant incomes—that is, the least skilled and the least educated. And conversely, the smallest leisure gains have been concentrated among the most educated, the same group that's had the biggest gains in income.
Aguiar and Hurst can't explain fully that rising inequality, just as nobody can explain fully the rising inequality in income. But there are, I think, two important morals here.
First, man does not live by bread alone. Our happiness depends partly on our incomes, but also on the time we spend with our friends, our hobbies, and our favorite TV shows. So, it's a good exercise in perspective to remember that by and large, the big winners in the income derby have been the small winners in the leisure derby, and vice versa.
Second, a certain class of pundits and politicians are quick to see any increase in income inequality as a problem that needs fixing—usually through some form of redistributive taxation. Applying the same philosophy to leisure, you could conclude that something must be done to reverse the trends of the past 40 years—say, by rounding up all those folks with extra time on their hands and putting them to (unpaid) work in the kitchens of their "less fortunate" neighbors. If you think it's OK to redistribute income but repellent to redistribute leisure, you might want to ask yourself what—if anything—is the fundamental difference.
According to the text, since 1965, in the United States,
Item 1 - income has increased dramatically across the board.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the text, tax earmarking
Item 0 - may be applied in more than one sense,
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the Unorthodox Approach, tax earmarking
Item 1 - has been made unsustainable by shifts in the nature of the economy and society.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the Unorthodox Approach, tax earmarking
Item 0 - is a means of reconnecting taxes and services.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
In his defense of earmarking, Buchanan, a stalwart of the Public Choice School, contends that
Item 3 - earmarked taxation is a means of giving more power to the citizen.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
Orthodox finance theorists find fault with earmarking. As the text points out, such writers argue that earmarking
Item 4 - does not increase taxpayers choices over tax and spending decisions.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
Orthodox finance theorists find fault with earmarking. As the text points out, such writers argue that earmarking
Item 3 - is an exercise in deceiving voters.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the text, in the traditional approach to public finance
Item 1 - equity in raising taxes is judged by the ability to pay as well as the benefit criterion.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the text, in the traditional approach to public finance
Item 0 - tax revenues are put in a general fund from which public services are provided.
Provas
Questão presente nas seguintes provas
BASED ON YOUR INTERPRETATION OF THE TEXT THAT FOLLOWS, DETERMINE IF THE DECLARATION IS RIGHT OR WRONG.
SECOND TEXT
Paying for Public Spending: Is There a Role for Earmarked Taxes?
(Abridged version of Margaret Wilkinson’s “Paying for Public Spending: Is There a Role for Earmarked Taxes?” Fiscal Studies (1994) vol. 15, nº 4, pp. 119-35, adapted for the Exam).
Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending program, or narrow, for a specific project within a program. The principal example of earmarking (nominal) in the UK today is National Insurance Contributions which go to the National Insurance Fund out of which contributory benefits are paid.
The idea of earmarking has made considerable progress among politicians. Supporters of earmarking who are on the Left or in the Center see it as a means of encouraging people to pay for better services (such as health and education). Those on the libertarian Right see it as demonstrating to voters the cost of state services and advancing opting out and privatization. A third view is that, whatever its outcome, earmarking would make for informed choices and more democracy. Finally, there are the skeptical who think that there should not be any greater role for earmarking than there is at present.
Attitudes to Public Spending and Taxation
A 1991 research on British Social Attitudes show that, in most areas of expenditure, people want more public spending. Even though the rubric warns ‘Remember if you say “much more”, it might require a tax increase to pay for it’, 90 per cent for health and around 80 per cent for education and pensions want ‘more’ or ‘much more’ spending. ‘The environment’ and police/law enforcement are also viewed favorably. Respondents are neutral on unemployment benefits, and only defense spending and the arts are seen as areas to be cut.
However, they do not expect to pay higher taxes. How the conflict is reconciled? The research also shows what people think about levels of taxation on different incomes, and in which income group they place themselves. Fifty per cent of respondents thought that those in the high income group paid too little in taxes and, by implication, could pay more and fund desirable social expenditure. However, they found tax levels on those with middle and low incomes were about right or too high, and 96 per cent of respondents placed themselves in these income groups. Thus people think that those with ‘high incomes’ should pay more tax — but hardly anyone thinks that he or she has a high income. Given this situation, some politicians think that earmarking could make taxes less unpopular.
Traditional Public Finance
The traditional approach describes the allocative and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity
in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution, which improves on the market outcome and achieves an efficient
allocation of resources. Traditional theory employs the device of a ‘social welfare function’ which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, ‘the government’ is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge.
Traditional theorists take a pragmatic view of earmarking (Musgrave and Musgrave, 1989, and Rivlin, 1989), or ignore it entirely (Kay and King, 1990), or are skeptical (Dilnot, 1993). Musgrave and Musgrave admit that earmarking introduces rigidities into the budgetary procedure, but support strong earmarking where particular taxes are like charges on the consumer; they cite US gasoline taxes. In the most recent edition of their classic text, they allow that formal, information-giving earmarking may also have a part to play in the fiscal system. Rivlin finds earmarking reduces resistance to paying taxes; she points to the fact that there was no backlash to the 1983 US federal gasoline tax increase which ‘paid to fix roads’, nor to the repeated increases in US payroll taxes which fund social security. In Britain, Hills, of London School of Economics, supports earmarking as a measure to promote greater democracy (Hills, 1993). However, most traditional thinking on taxation rejects a large role for earmarked taxes.
The OECD definition of a tax appears to rule it out: ‘the term taxes is confined to compulsory, unrequited payments to general government’ (OECD, 1988). Orthodox public finance theorists argue that public spending should be determined by policy decisions, not by the amount of revenue raised by an earmarked tax. They point out that earmarking reduces the flexibility of the fiscal system: the yield of a tax and the revenue necessary for a service may at the start coincide, but over time, excess revenues may accumulate under some heads while there are deficiencies elsewhere. Dilnot (1993) shows Britain’s principal earmarked tax does not determine the amount of spending on the programs they pay for. He points out that in the early 1980s, when high unemployment cut that tax revenue, the tax rate was raised; in the boom of the late 1980s, as receipts rose, the subsidy to the National Insurance Fund from general taxation was cut; and in the recession of the 1990s, the subsidy was increased. In his view, ‘any further hypothecated taxes would principally be an exercise in deceiving voters that their tax payments controlled government spending in a way, which they simply will not’. However, he comments that more hypothecation might make it possible to raise more revenue, but remark that this would be on the basis of deluding taxpayers rather than increasing their choices over tax and spending decisions.
The Public Choice School
The theoretical base that libertarians refer to is the public choice school, which grew up in the 1950s and 1960s. The social welfare function has no place in the public choice model where the state is not ‘an independent choosing agent’, but ‘exists only as a means through which individuals combine to accomplish collective or jointly desired objectives’ (Buchanan, 1963). The public choice school contends that market failure is not corrected at zero cost. As well as market failure, there is government failure, which arises through the self-interested behavior of politicians and bureaucrats. The growth of the public sector is not a response to the demands of citizens, but a burden imposed by a powerful government bureaucracy. To restrain public spending, mechanisms to give more power to the citizen are necessary. Earmarked taxation is one of these mechanisms. Buchanan’s seminal paper on earmarked taxation (Buchanan, 1963) argued that financing public services from a general fund allowed the citizen to vote only on the aggregate level of public services, whereas earmarking allowed the voter/taxpayer/beneficiary ‘to participate separately, either directly or through his representative, in the several public expenditure decisions which may arise’. Thus voters could make ‘private’ choices on each public service by comparing their costs with their benefits. At the bottom line, earmarking represents a return to the benefit approach to equity in taxation.
An Unorthodox Approach
In a pamphlet, Reconnecting Taxation (1993), Mulgan and Murray contend that fundamental shifts in the nature of the economy and of society, which is now a ‘sophisticated, consumerist culture’, have made the old system unsustainable: the payment of taxes into a central pool out of which the state determines spending is too centralized, opaque and unresponsive. They base their arguments on ‘a tradition which works from the ground up’, which is suspicious of the state, and which ‘can be found in Jeffersonian liberalism, Catholic social thinking and in more recent years in feminist and green approaches to government’. They propose an alternative agenda, an important part of which is ‘to reconnect taxes and services, and to share sovereignty between elected representatives and citizens’. This reconnection will happen by hypothecating funds wherever possible. They propose ‘citizen choice’, rather than ‘top-down decision-making’. To make it work, they propose a ballot on a series of options which would give information on the annual cost of each option to the average taxpayer.
According to the text, research respondents
Item 4 - think that earmarking would make taxes less unpopular.
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Questão presente nas seguintes provas
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