MyLab Economics with Pearson eText -- Access Card -- for Economics
6th Edition
ISBN: 9780134124377
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 18.1.9PA
To determine
Why it is politically difficult to eliminate tax preferences for some groups in order to improve the tax code efficiency by reducing general tax rates.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
In 1989, Senator Bob Packwood asked Congress’s Joint Committee on Taxation how much extra revenue the government would raise if it just started taxing 100% of all income over $200,000 per year. The Joint Committee crunched some numbers and reported an answer: $204 billion per year.
a. What is wrong with this answer?
In 1989, very few people made over $200,000 a year, so the estimate of the tax revenue is far too high.
Increasing government spending by $204 billion each year would have generated economic growth, and subsequently even higher amounts of tax revenues.
The Joint Committee on Taxation did not have the tools needed to make such an estimate accurately.
No one would have an incentive to work once they had earned $200,000, so much of the taxable income would disappear.
Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that is, an income tax that would simply be 17% of each tax payer's taxable income. Suppose that Alice was single in the year 2016 with a taxable income of $29,000.
If the 17% flat tax proposed by Mr. Forbes had been in effect in 2016, what would Alice's tax have been?
The Laffer curve illustrates the concept that a.an increase in marginal tax rates will always cause tax revenues to decrease. b.when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase. c.when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline. d.an increase in marginal tax rates will always cause tax revenues to increase.
Chapter 18 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Economics
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4RQCh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.1.12PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3PACh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.3.11PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4RQCh. 18 - Prob. 18.4.5RQCh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.4.9PACh. 18 - Prob. 18.4.10PACh. 18 - Prob. 18.4.11PACh. 18 - Prob. 18.4.12PACh. 18 - Prob. 18.4.13PACh. 18 - Prob. 18.4.14PACh. 18 - Prob. 18.4.15PA
Knowledge Booster
Similar questions
- Recently, a politician was interviewed about fiscal policy where she mentioned reducing the "tax gap." a. Indicate whether the following statements are "True" or "False" regarding the tax gap. • The tax gap is the difference between how much tax is collected and how much Congress requires to be collected. . The tax gap is the difference between actual Federal income tax collections and the amount the IRS projects should be collected if there is full compliance with all income tax laws. b. There are pertinent political and economic issues relative to the tax gap. Complete the items below concerning the tax gap: By most estimates, the net annual tax gap is What means could be employed to reduce the gap? Hire more ● • $405 billion. personnel. • Excessive activity could result in the public's reaction • Shouldn't the government attempt to close the tax gap and thereby eliminate most of the.arrow_forwardPresident Biden has proposed a $2.2 trillion Infrastructure package to repair roads and bridges. The exact source of the funds is unclear at the time of construction of this exam, but some policy analysts think that at least one part of the funding will be an increase in the federal excise tax on gasoline. Suppose the size of this increase in excise tax is written as t. Using a graph and equilibrium, analyze and explain the impact of this t dollars per gallon increase in excise tax on gasoline. Which of the curve(s), if any, would shift, and why? Graphically, show the new equilibrium price and quantity (labeling it P1 and Q1). At the new equilibrium, please determine how much of the tax increase was borne by gasoline consumers and how much was absorbed by gasoline sellers? Indicate the incidence of taxation for both consumers and sellers on the graph and explain. What will determine whether consumers or sellers will bear a higher relative burden of taxation? Please explain in detail.arrow_forwardWhen John F. Kennedy became President of the United States in 1961, he brought to Washington some of the brightest young economists to the day to work on the council of Economic Advisers. One of the Council’s first proposals was to expand national income by reducing taxes. This eventually led to a substantial cut in personal income taxes in 1964. When a reporter asked Kennedy why he advocated a tax cut, Kennedy replied,“To stimulate the economy. Don’t you remember your economics 101?” Elaborate Kennedy’s reply as much as you can (To support your argument, you can use graph or equations...).arrow_forward
- Economist Arthur Laffer famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case?arrow_forwardAccording to Martin Gilens, which of the following best explains why most Americans are in favor of cutting welfare spending? a. They think that welfare benefits are too high b. They perceive the government as inefficiently spending the money c. They think that the government should instead redirect the money toward strengthening the country's military defense. d. They think that the government should instead redirect the money toward funding unemployment insurance. e. They perceive a vast majority of welfare recipients as undeserving of government assistance.arrow_forwardEconomist Arthur lagger famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case?arrow_forward
- Consider an economy with the following income distribution: each person in the bottom quartile of the income distribution earns $15,000; each person in the middle two quartiles earns $40,000; and each person in the top quartile of the income distribution earns $100,000.a. What is the Gini coefficient associated with this income distribution?b. Suppose the bottom quartile pays no taxes, the middle two quartiles pay 10 percent of its income in taxes, and the top quartile pays 28 percent of its income in taxes. Two-thirds of all tax money is redistributed equally to all citizens in the form of military defense, government pensions (social security), roads/highways, and so on. The remaining one-third of tax money is distributed entirely to the poorest quartile. What is the Gini coefficient associated with this redistribution plan?Would you consider this tax and redistribution plan to be a particularly aggressive income redistribution policy?arrow_forwardSuppose that the government imposes a per-unit tax on cell phones. The tax is imposed on producers of cell phones and the amount of the tax is $50 per cell phone. The following graph shows the effect of the tax. Use the graph to answer the following questions. a) How much of the tax per cell phone is paid by producers? How much of the tax per cell phone is paid by consumers? b) How much tax revenue (in total) does the government collect from the tax imposed on cell phones? c) What is the amount of the deadweight loss due to the presence of the tax on cell phones?arrow_forwardWrite the summary of following paragraph. Tax Treaty A tax treaty is an agreement between two or more countries by dividing the right to impose a tax on income derived from a state sourced by a resident or resident of another country. The purpose of this tax treaty is to avoid the imposition of double taxation and various tax evasion efforts arising from transactions between the two countries. One of the tax treaties that will be discussed is the Indonesian tax treaty with Singapore which was signed on May 8, 1990. The avoidance of double taxation on the tax object is as follows: • Immovable property, income from immovable property under Indonesian- Singapore tax treaty is taxable only from the country in which the immovable property is situated even though the owner of the immovable object is not a national of that State. • The operating profit earned by a business entity in a country under this agreement may only be imposed by the country of which the enterprise is domiciled, but…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning