Chapter 9 – Source of Government Revenue
9-4 Current Tax Issues
CA Standards:
12.3 Students analyze the influence of the federal government on the
American economy.
Objectives:
• Explain what is meant by the incidence of a tax.
• Discuss the advantages and disadvantages of the value added tax.
• Describe the major tax reforms since 1980.
Write definition of key terms found on
page 238 Use glossary in textbook
Read pages 238 - 241
Economics: Principles & Practices
Prepare for Open notebook Quiz
 Key
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Terms
Incidence of a tax
Value Added Tax (VAT)
Accelerated Depreciation
Investment Tax Credit
Tangible Personal Property
Surcharge
Alternative Minimum Tax
page 228
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Most people feel that they already pay
enough taxes. Federal, state, and local
governments, however, never seem to have
enough revenue to satisfy everyone’s needs.
For these and other reasons, three tax
issues usually are of interest: the incidence
of a tax, the value added tax, and tax
reform.
1. What is meant by the “incidence” of a tax?
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- the burden of tax
2. What are five advantages of a value added
tax?
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It is hard to avoid
The incidence is widely spread
It is not visible to the final consumer
It is easy to collect
It can raise a large amount of revenue
3. What are two disadvantages of a value added
tax?
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- It is invisible to consumers
- It would compete with state sales taxes
4. What were three main provisions of
Economic Recovery Tax Act of 1981?
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- change in tax brackets
- allowed for accelerated depreciation
- introduce the investment tax credit
5. Why was there a call for tax reform in the
mid 1980s?
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- People felt the tax code favored the rich and
powerful.
6. What were four main provisions of the tax
reform passed by Congress in 1986?
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changed tax brackets
added a surcharge
strengthened the alternative minimum tax
shifted taxes from individuals to corporations
7. What was the driving force behind the
Omnibus Budget Reconciliation Act of 1993?
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- the need for the federal government to balance
its budget
Be prepared for open
notebook quiz