Fixed Tax Per Head

Abstract

In section 2, we assumed that the government fixes the tax rate. In section 4, instead, we shall postulate that the government fixes the tax per head. Let us begin with budget dynamics. The government spends a certain per capita amount on goods and services G = gN with g = const. In addition the government imposes a lumpsum tax T = tN with t = const. The budget deficit can be defined as the excess of government purchases and public interest over tax revenue B = G + rD − T. The budget deficit augments public debt $\dot{D}=B$ . This involves $\dot{D}=gN=rD-tN$ .