Critical Principles of Taxation for the Public Budgetary Process, Essay Example

The government utilizes its resources, through the public budgetary process, to finance its plans, programs, and services. Some revenue source that various US governmental agencies use includes; sales tax, property rates, and income taxes (King, Carl & Molly 2015). Importantly, public administrators and policy makers consider various factors in selecting the revenue source at the federal, state and local government levels. The two major factors that policy makers will consider are people’s ability to pay and benefits received from government services.

Firstly, the revenue source will be selected depending on people’s ability to pay. According to Rittenberg and Timothy (2008), this principles stipulates that people should more taxes remit as people’s income increases since expenditure on public services increases. Using ability-to-pay criterion, three forms of tax could be applicable. Firstly, regressive tax whereby the percentage of tax increases as income falls (Fleming, Peroni & Shay, 2001). For instance, on inferior good tax like cigarettes tax, low-income people pay a large portion compared to high-income earning individuals. Secondly, proportional tax whereby individuals incur a fixed tax percentage regardless of income levels. Thirdly, progressive tax whereby tax charged increases with income. For instance, federal income tax rate for a married couple income of $20,000 is 28% while above $379,150 is 35% (King, Carl & Molly 2015).

Moreover, the optimal revenue source selection will depend on the benefits-received principle. According to the criterion, a tax should be charged depending on benefits received from government services (Rittenberg & Timothy, 2008). For instance, the local government majorly relies on property tax. Therefore, provision of quality local services like schools, drainage attracts more property tax remittance from property owners. Similarly, user fees paid for certain government services applies benefits received criterion. For instance, visitor’s national park entrance fee, student tuition fees, and highway motorist tolls are paid for consumption of public services (Fleming, Peroni & Shay, 2001).

In conclusion, government policy makers and public administrators consider particular factors in making revenue-source choice decisions. Majorly, they will examine the people’s ability-to-pay principle for certain commodities. Likewise, the benefits-received criterion will apply to government service provisions, especially at the local government level.

References

Rittenberg, L., & Timothy D. (2008). Principles of microeconomics. New York: Flatworld Knowledge.

Fleming Jr, J., Peroni, R., & Shay, S. (2001). Fairness in International Taxation: The Ability-to-Pay Case for Taxing Worldwide Income. Fla. Tax Rev., 5, 299

King, D, Carl J., & Molly J. (2015). A Comparison of the US Tax Systems in 1963 and 2013. Journal of Business and Behavior Sciences, 27(1), 71-83.