Ch 1 Textbook Solutions - Chapter 01 Taxes and Taxing...

Chapter 01 - Taxes and Taxing Jurisdictions
1-1
Questions and Problems for Discussion
1. Tax payments differ from government fines and penalties because they are not intended to deter
or punish unacceptable behavior. Tax payments differ from fees or user charges because they
do not entitle the payer to a specific government good or service, such as a postage stamp or a
driver’s license. Tax payments also differ from fees or user charges because they are
compulsory.
2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory payment is
not specifically punitive but does apply selectively to those companies most likely responsible for
the polluted condition of Green River. However, these same companies may be the entities that
benefit most from the environmental clean-up.
3. This payment more closely resembles a fee for a government service than a transaction-based
tax because the transaction occurs between a private party and the jurisdiction itself, rather than
between private parties engaging in a market transaction. The payment also entitles the payer to
a specific benefit (the right to marry under law).
4. To the extent that the decline in exterior maintenance reduces the value of Mr. P’s apartment
complex, he bears the incidence of the increased property tax. To the extent that the decline
reduces the value of adjoining properties or makes the neighborhood less attractive, the owners
of the adjoining properties and the neighborhood residents share the incidence of the tax
increase.
5. People who do not directly use public schools (such as Mr. and Mrs. K or people who do not
have children) indirectly benefit from a public education system for the general population.
Arguably, public education contributes to a skilled workforce and improves the cultural and social
environment in which Mr. and Mrs. K live. Based on this argument, Mr. and Mrs. K should not be
exempt from the local property tax.
6. The consumers who pay the same price for a smaller bar of soap of lesser quality bear the
incidence of the new gross receipts tax.
7. Real property cannot be hidden or moved, and its ownership (legal title) is a matter of public
record. In contrast, personal property is mobile and may be easily concealed. Moreover,
jurisdictions may not have an effective means to discover or trace ownership of personal
property.
8. Arguably, private golf courses beautify the locality and are environmentally more desirable than
other commercial activities. They also may require more acreage than other businesses and,
therefore, would be at a competitive disadvantage without a preferential real property tax rate.
9. Many jurisdictions that levy property taxes provide an exemption for public institutions, such as
state universities or private colleges. If University K is entitled to such an exemption, every
commercial building or residence acquired by the University reduces the local jurisdiction’s
property tax base.