Assume that in a given country, tax revenues, T, depend on income, I, according to the formula T= - 4,000 + 0.21 Thus, for example, when a household has an income of $50,000, its tax burden is -4,000+ 0.2 x 50,000, or $6,000. Is this a progressive tax schedule? [Hint: Compute average tax rates at several different levels of income.] Now let's generalize the tax schedule in this problem to: T= a + ti where a and t are numbers. (For example, in the tax schedule above, a =-4,000 and t = 0.2.) Write down a formula for the average tax rate as a function of

Assume that in a given country, tax revenues, T, depend on income, I, according to the formula T= - 4,000 + 0.21 Thus, for example, when a household has an income of $50,000, its tax burden is -4,000+ 0.2 x 50,000, or $6,000. Is this a progressive tax schedule? [Hint: Compute average tax rates at several different levels of income.] Now let's generalize the tax schedule in this problem to: T= a + ti where a and t are numbers. (For example, in the tax schedule above, a =-4,000 and t = 0.2.) Write down a formula for the average tax rate as a function of

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government

Section: Chapter Questions

Problem 3WNG

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Congress would like to increase tax revenues by 5.5 percent. Assume that the average taxpayer in the United States earns $56,000 and pays an average tax rate of 20 percent. Required: If the income effect is in effect for all taxpayers, what average tax rate will result in a 5.5 percent increase in tax revenues? Note: Round your answer to 2 decimal places.
Economist Arthur Laffer famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case?
C = 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
In a certain country, income tax is assessed as follows: There is NO tax on income up to $15,000. Income over $15,000 up to $30,000 is taxed at 12%. Income over $30,000 is taxed at 18%. Answer the following questions in a paragraph. 1) Write the piecewise function of this country (make sure to use decimals instead of percent). 2) Determine how much tax is to be paid on an income of $20,000.
What would it take to convert a sales tax into a true consumption tax? Senator Smith has suggested that the U.S. federal income tax is a more efficient form of tax than the Texas sales tax. What are the arguments for and against this position?
the new equilibrium level of real GDP if government spending increases by $150? 18. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150? 19. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?
C = 450 + 0.4Y | = 350 G = 150 X = 70 z = 35 + 0.1Y T= 0.15Y Yf = 1550 Q.2.4 Calculate the tax revenue to the government of this country when the economy remains in equilibrium. Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
9. Ch.16: Graph the Laffer Curve. Suppose a nation collects taxes as a percent of income. The point on the graph below indicates the current tax rate on the horizontal axis, which runs from 0% on the left to 100% on the right. The vertical axis gives the government's tax revenue. Draw the nation's Laffer curve. i. ii. Suppose we are at the dot shown on the graph. Could we increase the tax rate and generate additional government revenue Tax revenue Rmax Tax rate (percent of income)
Suppose there is a bill to increase the tax on cigarettes by $1 per pack coupled with an income tax cut of $500. Suppose a person smokes an average of 500 packs of cigarettes per year—and would thus face a tax increase of about $500 per year from the cigarette tax at the person’s current level of consumption. The income tax measure would increase the person’s after-tax income by $500. Would the combined measures be likely to have any effect on the person’s consumption of cigarettes? Why or why not?
C = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%. Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
20 Lilliput is a country that has closed borders and does not import or export any goods or services; hence, they do not worry about trade with other countries. Total spending for the federal government of Lilliput for the last fiscal year was $24.19 billion. The country collected $22.9 billion in taxes during this same fiscal year. Assume government transfers were zero. Based on this information, what is Lilliput's budget balance? Enter your answer to two decimal places. budget balance: $ In the last fiscal year, Lilliput was running a budget surplus a budget deficit a balanced budget billion
The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes . The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new consumption line you just plotted to calculate the new total expenditure at two levels of real GDP and fill in the following table. GDP level Total Expenditure (Billions of dollars) (Billions of dollars) 10 90 Use the green points (triangle symbols) to draw the new total…