EBK PRINCIPLES OF MICROECONOMICS
12th Edition
ISBN: 9780134069180
Author: Oster
Publisher: YUZU
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Chapter 19, Problem 1.3P
To determine
Identify if the tax is proportional, progressive, or regressive in nature.
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Students have asked these similar questions
Income tax is an example of
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.
Is the tax imposed on cigarettes a progressive, proportional, or a regressive form of taxation? Why? What are some other examples of this type of tax?
Chapter 19 Solutions
EBK PRINCIPLES OF MICROECONOMICS
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- Some economists have argued that taxation is one of the causes of economic inefficiency. They claim that taxation creates serious adverse effects on the economy through market distortions and heavy burdens on businesses and consumers. Others argue that taxation is not only a reliable source of revenues to implement government programs and projects (building schools, roads, highways, financing research & development), but also the net loss of efficiency due to taxation is not too large as claimed. The negative effects of taxation can be eliminate by implementing an optimal tax code. Provide your arguments on how we should reform the tax code in order to allow the governments to collect tax revenues without putting unnecessary burdens to businesses and consumers. Or should the government eliminate taxation?arrow_forwardHow can the government improve tax collections without imposing much tax to the consumer?arrow_forwardIf the government imposes a tax of 8% on luxury cars that the consumer must pay, why does the consumer not actually pay the full 8%? How is it determined how much the consumer will pay and how much the producer will pay? Is it possible for an 8% tax the government imposes on the consumer to actually have 1% paid by the consumer and 7% by the producer? Why or why not?arrow_forward
- If a tax of $0.90 is imposed, what is the tax revenue?arrow_forwardDiscuss the taxation system of the United States. What kind of system does the U.S currently employ? What are the differences between direct and indirect taxes? What flaws does our tax system have, if any?arrow_forwardGive an example for the Average Tax Rates?arrow_forward
- How can tax incidences have a positive and negative impact on the economy?arrow_forwardDoes a tax increase or decrease the quantity of the taxed good that is consumed?arrow_forwardThe following graph shows the daily market for wine. Suppose the government institutes a tax of $23.20 per bottle. This places a wedge between the price buyers pay and the price sellers receive. Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. The burden of the tax falls more heavily on the ___ elastic side of the market.arrow_forward
- Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why?arrow_forwardEconomists in Champaign have been studying the local market for pizza. The market is described in the graph below: If the Government imposes a tax of $3 per pizza, what will be the total government tax revenue?arrow_forwardIn today’s societies, we pay several different types of taxes. Take a moment to consider all the different kinds of taxes you paid last week. You might have paid sales tax on items you bought or had income come out of your paycheck. To complete the Discussion activity, write a post that answers the following questions: Name three types of taxes and analyze the deadweight loss of each.arrow_forward
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