Compare and contrast the pros and cons of implementing an ad valorem tax and a unit tax on the retail purchase of gasoline. In the country of Taxhappya, there is a national sales tax of 8% on the sale of retail items. Annual retail sales total $1 billion. The Taxhappya legislature is proposing an increase in the national sales tax to 9.5 percent, but it is estimated that this tax increase will decrease annual retail sales by $125 million.
Compare and contrast the pros and cons of implementing an ad valorem tax and a unit tax on the retail purchase of gasoline. In the country of Taxhappya, there is a national sales tax of 8% on the sale of retail items. Annual retail sales total $1 billion. The Taxhappya legislature is proposing an increase in the national sales tax to 9.5 percent, but it is estimated that this tax increase will decrease annual retail sales by $125 million.
Chapter1: Federal Income Taxation—an Overview
Section: Chapter Questions
Problem 45P
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Compare and contrast the pros and cons of implementing an ad valorem tax and a unit tax on the retail purchase of gasoline. In the country of Taxhappya, there is a national sales tax of 8% on the sale of retail items. Annual retail sales total $1 billion. The Taxhappya legislature is proposing an increase in the national sales tax to 9.5 percent, but it is estimated that this tax increase will decrease annual retail sales by $125 million. Will this tax generate more revenue for the Taxhappya government? (SHOW YOUR WORK)
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