Chapter 40 Flashcards
(15 cards)
Q: What are the two main sources of welfare state funding?
A: Taxes and social contributions.
Q: What does PAYG stand for in pension financing?
A: Pay-As-You-Go – current workers finance current retirees’ benefits.
Q: What is “fiscal welfare”?
A: Welfare delivered through tax breaks, deductions, or exemptions (also called the “hidden welfare state”).
Q: How does the Bismarckian model fund welfare?
A: Mainly through earnings-related social contributions, especially from employers.
Q: What are the risks of relying heavily on social contributions?
A: High labor costs, reduced job growth, and increased informal work.
Q: Why might tax-funded systems be more flexible?
A: Governments can shift spending priorities more easily when financing from general revenues.
Q: What is a regressive tax or contribution?
A: A tax that takes a larger share of income from the poor than the rich.
Q: What is the dependency ratio?
A: The ratio of people receiving benefits to those financing the system (e.g., workers vs. retirees).
Q: How has globalisation impacted welfare financing?
A: It has increased tax competition and made capital more mobile, making tax collection harder.
Q: What was the French CSG tax?
A: A broad-based social contribution on all forms of income introduced to fund welfare more equitably.
Q: Why do employers prefer contribution-based systems?
A: Contributions are often seen as earned rights and may have higher political legitimacy.
Q: What are user fees and how do they affect equity?
A: Charges for services like healthcare or childcare that can deter access for low-income households.
Q: How can welfare financing reforms improve employment?
A: By reducing non-wage labor costs (e.g., cutting employer contributions for low-skilled jobs).
Q: What is the relationship between taxation and redistribution?
A: Progressive taxation can reduce income inequality, especially when combined with redistributive spending.
Q: What is “transfer pricing”?
A: A tax avoidance method where multinational firms shift profits across borders to lower-tax jurisdictions.
