Chapter 1, Problem 1RP

Which of the following best reflects the ability-to-pay philosophy of taxation?         a tax on residential property        a progressive income tax        an excise tax on gasoline        an excise tax on coffee

Congress uses the tax code to influence our behavior. Examples include deductions for mortgage interest and property taxes to steer people to home ownership instead of renting. Tax credits for purchasing products that use alternative energy are another incentive. Likewise, deductions for charitable contributions encourage charitable donations. Is this a good (i.e., proper) way for Congress to achieve economic objectives? Can you identify other tax deductions or tax credits that encourage particular behaviors?

Assume that the United States Congress passes a tax law that provides for a "rebate" to taxpayers. One of the goals of the rebate is               A. Increase consumer disposable income and expand the economy.               B. Increase consumer disposable income and contract the economy.               C. Decrease consumer disposable income and expand the economy               D. Decrease consumer disposable income and contract the economy.