Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 19.3, Problem 2ST
To determine
Reasons for the interest of political candidates to speak in general terms.
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Students have asked these similar questions
In 1989, Senator Bob Packwood asked Congress’s Joint Committee on Taxation how much extra revenue the government would raise if it just started taxing 100% of all income over $200,000 per year. The Joint Committee crunched some numbers and reported an answer: $204 billion per year.
a. What is wrong with this answer?
In 1989, very few people made over $200,000 a year, so the estimate of the tax revenue is far too high.
Increasing government spending by $204 billion each year would have generated economic growth, and subsequently even higher amounts of tax revenues.
The Joint Committee on Taxation did not have the tools needed to make such an estimate accurately.
No one would have an incentive to work once they had earned $200,000, so much of the taxable income would disappear.
Your Finance Minister considers making a tax reform. He asks you, as a senior tax administrator, to advise him on the requirements from a good tax system. What would you advise him?
Explain: “Politicians would make more rational economic decisions if they weren’t running for reelection every few years.”
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Similar questions
- The median voter theory argues that politicians will try to match policies to what Select the correct answer below: appeals to the voters on the right side of the political spectrum appeals to the preferences of the median voter appeals to the voters on the left side of the political spectrum O appeals to the majority voter preferencearrow_forwardWhat is your take on the amount of money politicians spend on political campaigns? Does it have a positive/negative impact on the economy?arrow_forwardAll of the following statements are true about median voter theory, except: Select the correct answer below: The median voter is in the middle of the political spectrum. The effects of the U.S. sugar lobby supports median voter theory. Median voter theory suggests that if a candidate needs more than 50% to win an election, the best way to win is to have median preferences. The median voter theory argues that politicians will try to match policies to what pleases the median voter preferences.arrow_forward
- Discuss the taxation system of the United States. What kind of system does the U.S currently employ? What are the differences between direct and indirect taxes? What flaws does our tax system have, if any?arrow_forwardWho would have been most likely to vote Republican in the late 19th century?arrow_forwardSuppose there are five voters. Their preferences for the amount the federal government should spend to stimulate the economy are shown in the figure to the right. According to the median voter theorem, in a vote, how much will the federal government spend to stimulate the economy? The federal government will spend S billion. (Enter your response as an integer.) 1200 1100 1000- 900- 800- 700- 600 2500- 400- 300- 200- 100- Greg kelly Christina Luisarrow_forward
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