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ALL RIGHTS RESERVED. Instructors of classes adopting PUBLIC FINANCE: A CONTEMPORARY APPLICATION OF THEORY TO POLICY, Seventh Edition by David N. Hyman as an assigned textbook may reproduce material from this publication for classroom
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Criteria for Evaluating Alternative Methods of Government Finance
Equity The distribution of the burden of government finance should
coincide with commonly held notions of fairness and ability-to-pay.
Efficiency The system of government finance should raise revenues
with only a minimal loss in efficiency in the private sector. Administrative ease
A government finance system should be relatively easy to administer in a consistent manner without excessive costs to collect, enforce, and comply with taxes and tax laws.
Tax Evasion is the term for illegal ways of avoiding paying taxes. It is typically the result of not declaring income or overstating otherwise legal deductions.
Tax Avoidance is the term for the legal ways of avoiding paying taxes, typically the result of avoiding activities that are taxed, delaying the time in which taxes are owed, or taking an action designed to lower a tax burden.
Money (but more usually time) is voluntarily given to government. Military service or work in the Peace Corps can be considered a donation when the compensation is less than the market value of the time.
User Charges Payments by users of the government service can be
expected. Examples include tuition, fees paid to enter state parks, greens fees at publicly owned golf courses.
Earmarked Taxes Taxes can be implemented to fund specific public goods.
Examples include gasoline taxes and tolls designed to fund road and bridge repair.