Econ 221 - Ch 12 Review questions

40. The most efficient tax system has a broad tax base and a low tax rate. A) True B) False 41. Making the income tax more progressive by adding more tax brackets potentially can result in A) stronger economic growth B) a more "equitable" tax C) no effect on equity or economic growth D) slower economic growth 42. The Atlanta city council decides to double taxes on small business in the downtown area to raise more tax revenue to fund more social programs. From an economic growth perspective, why is this a misguided economic policy? A) it is not a bad policy; doubling taxes will automatically double tax revenue B) excessive taxes on business can result in reduced jobs, incomes and business creation because business simply moves to a new government jurisdiction. C) it is not a bad policy; raising taxes will double tax revenue, raise income levels, and encourage business creation. D) excessive taxes will provide more social benefits, so business will tolerate unusually high taxes and stay…

Question: 2The government is interested in imposing a tax to generate revenue X. It is considering whether they should tax the consumer’s income or impose a tax on a commodity y. What should the government do if they do NOT care about consumer welfare? Use three graphs to illustrate your answer and explain those graphs in your answer.

Use information from paragraph 4 to answer the following question. Before the Progressive Era, many taxes had been based on property. But many wealthy people hid such property as stocks and bonds from the govemment and did not pay taxes on them. Largely for this reason, progressives demanded that taxes be based on income rather than on property. In 1911, Wisconsin passed the first effective state income tax law. Two years later, Congress enacted what became the first permanent federal income tax in the United States. Which conclusion about taxation during the Progressive Era is best supported by the text? O Progressives demanded that taxes be based on income rather than on property. O Property taxes included ownership of stocks and bonds, which are inescapable today. O Property taxes were an ineffective means for the government to collect the money it needed to operate. O Progressives managed to pass the first state income tax, which was two years before the federal law was passed. 7 8…

1. "Taxes are necessary evil". Based on what we discussed in class, discuss and argue why this is true. Then, describe in details how we can build an efficient taxation system?

The table below describes three tax systems (A, B, and C) for three income levels. Tax system A Tax system B Tax system C Income Amount of Tax Percent of Income Amount of Tax Percent of Income Amount of Tax Percent of Income 20,000 $ 50,000 100,000 S $. 3,000 5,000 15% 15% 15% 30,000 15,000 10,000 a. Fill in the blanks in the table and, for each tax system, explain whether it is progressive, regressive or proportional. b. Which of these three tax systems can be considered as equitable?

4. Why do government entities impose taxes and how is the type of taxation chosen (e.g., excise v. income v. sales taxes)?

following table shows the marginal tax rate under tax systems A and B. Tax System A Marginal Tax Rate Tax System B Marginal Tax Rate Income Range 0- $20,000 $20,001 - $40,000 $40,001 - $80,000 $80,001 - $200,000 > $200,000 0% 20% 28% 35% 35% 5% 15% 30% 50% 80% der Tax System A, the average tax rate for an income level of $100,000 is A 222% OB. 28% OC. 20.75%. OD. 35%

3- Why the government sector imposes a tax on firms and households.