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Example of Hour Exam #3 - spring 1993

Example of Hour Exam #3 - spring 1993 - Eco(Fin 354 Public...

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Unformatted text preview: Eco(Fin) 354 Public Finance FINAL EXAM Spring 1993 (15 points) Draw a carefully labelled Lorenz Curve and explain what is meant by a GlNl coefficient. Describe what can be revealed by comparing pre and post tax Lorenz curves. Can comparing pre and post tax Lorenz curves tell us anything about the equity of the tax system? Discuss. (15 points) Explain what is meant by relative fiscal capacity and tax effort. Describe how capacity and tax effort are measured and discuss'some of the uses to which these measures are put. Use the following data to demonstrate how we might - measure the capacity and tax effort of states A, B and 0. State A State B State G Tax Rate Tax Base Tax Rate Tax Base Tax Rate Tax Base Personal income $500,000 $320,000 $200,000 Retail Sales $360,000 5% $400,000 $240,000 0% Property $200,000 5% $200,000 $600,000 1 0% Population 5 8 4 (20 points) Write an essay on tax shifting and tax incidence. in this essay: a. define tax shifting and incidence. b. explain the likely incidence of taxes on corporate profits, sales and on property values. (20 points) Explain the conditions under which it is appropriate for state and local governments to finance their activities with short or long term debt. (20 points) Incalculating their federal income tax liability, citizens are allowed to deduct or exclude from their adjusted gross income the state and local income taxes they pay. the property taxes they pay and the interest payments they receive on the municipal bonds they hold. Why does the Federal government allow this? And what are the effects of such deductions and exclusions on the distribution of taxes among taxpayers? 6. (10 points) Compare and contrast defined benefit and defined contribution pension plans. What is meant by full-funding of a pension plan and why is it important to achieve full funding. ...
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