Bonds although implicit taxes are real and equally

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Macroeconomics for Today
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Chapter 12 / Exercise 7
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bonds). Although implicit taxes are real and equally important in understanding our tax system, they are dif quantify. Because implicit taxes are difficult to quantify, they are not generally considered when calculating average effective tax rates (i.e., when assessing relative tax burdens). Since implicit taxes are ignored in these calcu taxpayers may conclude that groups of taxpayers investing in tax advantaged assets (subject to implicit tax) do not pay their fair share of tax as represented by a low effective tax rate. 96) Mandy's forecast is based on dynamic forecasting (i.e., she is considering how taxpayers may alter their activities in response to the tax law change). Given that Mandy is projecting a decrease in tax revenues, her estimates must be based on the substitution effect - i.e., taxpayers are likely to substitute nontaxable activities (e.g., simply not purchase gum) for taxable purchases. The decreased tax revenue from gum sales does not necessarily imply that Mandy will achieve a cleaner city as taxpayers may simply buy their gum outside the city. This will depend on how close the city is to other towns/neighborhoods that do not impose the high gum tax. 38
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Chapter 12 / Exercise 7
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Answer Key Testname: UNTITLED1 97) A sales tax by definition is a proportional tax - i.e., as taxable purchases increase, the sales tax rate (i.e., the marginal tax rate) remains constant. For this reason, Milton is correct. Nonetheless, when you consider that the proportion of one's total income spent on taxable purchases likely decreases as total income increases, the sales tax may be considered a regressive tax. For this reason, Rocco is correct. Vertical equity is achieved when taxpayers with greater ability to pay tax pay more tax relative to taxpayers lesser ability to pay tax. One can view vertical equity in terms of tax dollars paid or in terms of tax rates. Pr of a sales tax (e.g., Milton) are more likely to argue that vertical equity is achieved when taxpayers with a greater ability to pay tax pay more in tax dollars. Opponents of a national sales tax (e.g., Rocco) are more likely to argue that taxpayers with a greater ability to pay should be subject to a higher tax rate. This view is based upon the argument that the relative burden of a sales tax decreases as a taxpayer's income (e.g., disposable income) increases. 98) Certainty means that taxpayers should be able to determine when to pay the tax, where to pay the tax, and how to determine the tax. It is relatively easy to determine when and where to pay the federal income tax. For example, individual federal income tax returns and the remaining balance of taxes owed must be filed with the Internal Revenue Service each year on or before April 15 th (or the first business day following April 15 th ). Thus, from this perspective, the federal income tax scores high. However, the federal income tax is often criticized as being complex. What are taxable/nontaxable forms o

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