Final answer:
Local entertainment venue owners pay around 35% in taxes and have an MPC of 0.8, often spending 65% of their income locally, which supports local economies. Different income levels and tax rates lead to varying impacts on spending habits, with an overall goal of balancing tax revenue, redistribution, and economic efficiency.
Step-by-step explanation:
The discussion around the difference in taxpayers and strip malls relates to different economic behaviors and their impact on the local economy. Taxpayers like local entertainment venue owners have lower incomes and pay usually around 35% of their marginal income in taxes, leading to a different capacity to save and spend compared to higher earners such as professional athletes. Their marginal propensity to consume (MPC) is estimated at 0.8 meaning they spend 80% of their additional income, and due to their local residence, they likely spend 65% of their income on local goods, therefore circulating money within their community.
Regarding the economic impact, higher taxes on the very wealthy, like professional athletes, may not significantly alter their spending habits due to high savings rates and income levels, while taxes on middle-income earners, like local business owners, can more directly influence local economies by affecting their consumption patterns. Politicians often debate who bears the burden of taxes due to the inherent political implications and goal of income redistribution. Economists are concerned with creating a tax system that balances raising revenue, redistributing income, and minimizing the distortion of individual and firm decisions, to avoid economic inefficiency.