Question

Income Overview

• Income from individual income taxes in 2016 is estimated to be about 49% of all receipts that year. Income tax is levied on over 100 million American households each year.

• Payroll tax income is estimated to be about 33% of all receipts that year. Payroll taxes are taxes that employers are required to pay when they pay their staff their salaries.
• Corporate income taxes are estimated to make up 9% of all receipts that year. Corporate income tax is imposed at the federal level on all entities treated as corporations.

Most of the taxes the federal government collects is from income taxes on individuals not corporations.

Question 1: Why have we, as voters, decided to fund the government primarily by taxing our income.

Question 2: How do tax policies influence consumers' behavior?

Question 3: Taxpayers in the U.S. are simultaneously consumers and providers/sellers of government services. As a consumer your goal is to get the best product/service (police, fire, trash collection, street repair) at the lowest possible price. But as a seller/provider (taxpayer providing the funds to do the services) you want to charge the most (collect the most taxes) and provide the lowest quality of product/service possible to maximize your benefit/profit. Explain how these conflicting roles play out in the market and what your thoughts are on this. Example: Individuals often complain about how bad our roads are but also vote against tax increases to pay for road repairs. Another example would be the DMV. It is notorious for bad customer service. But if people were told they would have to pay more in fees to improve the level of customer service, most would say no thanks. Those who want better customer service with DMV related activities now pay for membership to AAA.

Answer 1

The explanation of the above question mentioned in below image