What is social security and how does it work? How does social security work over time? Why Ida May Fuller is a striking example? How does social security redistribute in practice?

Social Security was to provide a means of income support for this unfortunate generation of the elderly.

Full Benefits Age (FBA) The age at which a Social Security recipient receives full retirement benefits (Primary Insurance Amount).

Early Entitlement Age (EEA)The earliest age at which a Social Security recipient can

receive reduced benefits. The very first beneficiary of Social Security was Ida May Fuller. da May worked for only three years after the establishment of the Social Security system, and paid a total of $24.75 in Social Security taxes. Ida May went on to live for 35 more years, dying at age 100 in 1975. Ove those 35 years, she collected a total of $22,888.92 in Social Security benefits. Quite a return on her $24.75 investment! Ida May is a striking example of the first generation of Social Security beneficiaries who were the big winners under this new social program.

 

3.2.. (график справа)

b)social welfare function (SWF) A function that combines the utility functions of all individuals into an overall social utility function.

With a utilitarian social welfare function, society’s goal is to maximize the sum of individual utilities: SWF= U1+ U2+...+Un

The utilities of all individuals are given equal weight, and summed to get total social welfare. This formulation implies that we should transfer from person 1 to person 2 as long as the utility gain to person 1 is greater than the utility loss to person 2. In other words, this implies that society is indifferent between one util (a unit of well-being) for a poor person and one for a rich person.

 

c) 'Equity-Efficiency Tradeoff'

An economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production possibility frontier, where any additional gains in production efficiency must be offset by a reduction in the economy's equity.

d) The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.

VARIANT 5

Social Security and Retirement. Theory and empirical evidence: measuring the crowd - out effect of social security on savings.

In theory, there are two effects of Social Security on retirement decisions.

The first is the implicit taxation that Social Security may levy on work at older

ages by reducing the value of Social Security benefits if retirement is delayed.

The second effect of Social Security on retirement is through the redistribution discussed earlier. This system results in some groups becoming richer over their life, and others becoming poorer. These changes in wealth will have income effects on retirement, as the groups that are richer use some of their wealth to buy themselves more retirement, and the groups that are poorer

work longer.

The Social Security program crowds out savings to some extent, but the consumption-smoothing value of this program to the elderly is shown by the dramatic reduction in elderly poverty rates over the past 40 years.

Public finance on federal, regional (state) and municipal (local) levels. Revenues and expenditures. Budget deficit /proficit.

Level of government	Source of Revenue	Expenditures
Federal	Personal income tax, payroll tax for social security, corporate profit tax	National defense, retirement, healthcare
State	Personal income tax, sales tax	Highways, education, healthcare
Local	Property tax, Sales tax	Education, public safety

 

The government’s deficit, in contrast, is the amount by which its spending has exceeded its revenues in any given year. The government’s deficit is a flow: the deficit is the amount each year by which expenditures exceed revenues. Each year’s deficit flow is added to the previous year’s debt stock to produce a new stock of debt owed. The budget proficit is an opposite situation, when revenues are more than spendings.

 

Explain the tax avoidance in practice. Determinants of deadweight loss. Deadweight loss and the design of efficient tax systems.

 

Tax avoidance in practice

The legendary economist John Maynard Keynes once remarked, “The avoidance of taxes is the only pursuit that still carries any reward.” His comment

appears to have been taken to heart by many individuals whose elastic behavior

allows them to avoid taxes. Some examples:

1. The British boat designer Uffa Fox lived in a home he constructed from a floating bridge. When the Inland Revenue (Britain’s tax collectors) attempted to collect property tax on the home, Fox began sailing it up and down the river. By the time he was done, Fox had collected so many different addresses that the Inland Revenue gave up their attempts.

2. An Englishman visiting Cyprus in the early 1980s asked a tour guide why so many of the houses seemed to have steel reinforcement bars jutting out from their top floors. The guide informed him that Cyprus had a building tax that applied only to finished structures. Owners of those houses could thus claim that they were still in the process of finishing the roof. The process, of course, never ended.

3. The Thai government levies a tax on signs in front of businesses. The tax is levied only on external signs and the rate depends on whether the sign is completely in Thai (low), in Thai and English (medium), or completely in English (very high). A walk around Bangkok thus reveals many businesses hanging English signs with a small amount of Thai writing in the upper-right-hand corner. Some businesses manage to avoid the tax entirely by printing the message on curtains that are hung in the front window, rendering the sign “internal” and thus tax-exempt.