Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 12, Problem 6PA
Subpart (a):
To determine
Reason for taxing only realized capital gains .
Subpart (b):
To determine
Reason for taxing only realized capital gains.
Subpart (c):
To determine
Reason for taxing only realized capital gains.
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When someone owns an asset (such as a share ofstock) that rises in value, he has an “accrued” capitalgain. If he sells the asset, he “realizes” the gains thathave previously accrued. Under the U.S. income taxsystem, realized capital gains are taxed, but accruedgains are not.a. Explain how individuals’ behavior is affected bythis rule.b. Some economists believe that cuts in capital gainstax rates, especially temporary ones, can raise taxrevenue. How might this be so?c. Do you think it is a good rule to tax realizedbut not accrued capital gains? Why orwhy not?
Choose the letter of the correct answer.
1. This kind of tax is derived from the individuals, corporate estates, and trusts income.
A. Donors tax
B. Capital gains tax
C. Income tax
D. Estate tax
2. This is a kind of tax on the rights of the decreased person to transmit his/ her estate to lawful heirs and beneficiaries at the time of death.
A. Donors tax
B. Capital gains tax
C. Income tax
D. Estate tax
3. This is a tax levied on gifts and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer.
A. Estate tax
B. Capital gains tax
C. Income tax
D. Donor Tax
4. A tax imposed on loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation.
A. Documentary tax
B. Capital gains tax
C. Income tax
D. Estate tax
5. A tax levied on the assessed value of land and permanently attached improvements owned by individuals or corporations.
A. Property tax
B. Capital gains tax
C. Income tax…
True or False (and explain your answer) :
The George W. Bush tax cuts (circa 2001) were touted by the Bush administration as something good for most American families.
As evidence, they pointed out that most Americans (92 million) would receive an average tax reduction of over $1000.
The median tax cut was less than $100.
Based on this information, we can conclude that most Americans got a tax cut around $1000.
Answer asap.
Will rate positively for correct explanation!
Chapter 12 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
- Thelma's current income is $100,000 and she currently pays $30,000 in income tax.w Any income she earns above $100,000 is taxed at 40 percent. Which following correctly calculates her tax burden? the her average tax rate is 30 percent her marginal tax rate is 40 percent her average tax rate is 40 percent her marginal tax rate is 30 percent.arrow_forwardexplain how income tax affects (i) household savings (ii) business investmentarrow_forwardCindy takes a summer job and earns an after-tax income of $3,000. Her living expenses during the summer were $2,500. What was Cindy's saving during the summer and the change, if any, in her wealth? >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign. Cindy's saving during the summer is $____.arrow_forward
- What are the main tax credit programs designed to boost the incomes of people who are unemployed or low earners? How effective are these tax credit programs, and for whom? Give two references and citations.arrow_forwardAccordingtothetextbook,whichofthefollowingstatementsis(are)correct? (x) An advantage of a consumption tax over the present income tax system is that a consumption tax discourages consumption and encourages saving. (y) If interest income from savings is taxed, a disincentive to save is created and less saving occurs. (z) An advantage of a consumption tax over the present tax system is that a consumption tax places more of the tax burden on the wealthy. (x), (y) and (z) (x) and (y) only (x) and (z) only (y) and (z) only (x) onlyarrow_forwardWhich principle states that taxes should be levied according to a taxpayer’s ability to pay?a) Benefit principleb) Horizontal equityc) Vertical equityd) Ability-to-pay principlearrow_forward
- When the government raises taxes on businesses, the price of bonds _______ and the yield on bonds ________, all else equal. falls; falls rises; rises falls; rises rises; fallsarrow_forwardWrite the letter of your choice on the space provided before each number. Thus, A – if only the 1st statement is CORRECT; B- if only the 2ND statement is CORRECT; C- if both 1st and 2nd statements are CORRECT and D- if both 1st and 2nd statements are INCORRECT. 1. Progressive taxes place a greater burden on those best able to pay. Value added tax is a progressive tax. 2. Proportional taxes are taxes levied at a constant rate. These taxes place an equal burden on the rich, the middle class, and the poor.arrow_forwardAccording to the textbook, which of the following statements about taxes in the U.S. is (are) correct? (x) Tax evasion is illegal, but tax avoidance is legal. (y) Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers. (z) In practice, the U.S. income tax system is filled with special provisions that alter a family's tax based on its specific circumstances. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (z) onlyarrow_forward
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