Question

Tax policy often trades off efficiency and equity. That is, many tax reform proposals that improve...

Tax policy often trades off efficiency and equity. That is, many tax reform proposals that improve efficiency have the effect of reducing vertical equity. Explain how both of the following improve efficiency but reduce vertical equity.

a. A flat tax

b. Ramsey-rule commodity taxation

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Vertical equity should lead to payment of more tax by people who earn more.

A. In flat tax rate system there are no slabs so everyone pays same tax relatively. One who earns say 10,000 income only pays tax @x% and other who earn say 1000 times more will also pay tax @x% in flat tax system.

So it reduces the vertical equity although increases efficiency as it is easy to calculate.

B. In Ramsey-rule commodity taxation, Taxes are charged on commodity rather than income earned. So anyone who buys a particular comodity will pay same tax as anyone else ignoring the income they earn. So this also reduces vertical equity system.

Hope this meets your purpose.

Kindly Like the answer if it was helpful. This motivates the experts.

Thanks.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Many tax reform proposals suggest moving to a flat tax system, one that eliminates progressive...
1. Many tax reform proposals suggest moving to a flat tax system, one that eliminates progressive tax brackets. One proposal would be that everyone pays (say) 25% of their income. Keeping the rest of the tax code intact, how would this change the market for luxury vs. lower priced homes? 2. I have the choice of two mortgages, one with a low rate and 2 points, and one with a high rate and no points. Why might my choice be...
Cigarettes in Australia have long been subject to excise tax – a per cigarette tax levied...
Cigarettes in Australia have long been subject to excise tax – a per cigarette tax levied on the suppliers of cigarettes. (The tax applies to all tobacco products, however for the purposes of this exam assume cigarette and tobacco consumption are the same thing). In 2016 the federal government announced that the excise tax rate for cigarettes would rise by 12.5% a year for the next 4 years. Over this period tax revenue collected from the sale of cigarettes has...
ONLY PROBLEMS (d) AND (e) NEED ANSWERED. THANK YOU. Consider the market for labor is segmented...
ONLY PROBLEMS (d) AND (e) NEED ANSWERED. THANK YOU. Consider the market for labor is segmented into the market for low skilled labor and the market for high skilled labor. If the low skilled labor market is given by the following function: labor demand: w = 35 – 0.005L; and labor supply is 4000. If the high skilled labor market is given by the following functions: labor demand: w = 400 – 2L, and the labor supply function is given...
Public policymakers often want to reduce the amount that people smoke. There are two ways that...
Public policymakers often want to reduce the amount that people smoke. There are two ways that policy can attempt to achieve this goal. One way to reduce smoking is to shift the demand curve for cigarettes and other tobacco products. Public service announcements, mandatory health warnings on cigarette packages, and the prohibition of cigarette advertising on television are all policies aimed at reducing the quantity of cigarettes demanded at any given price. If successful, these policies shift the demand curve...
The Millers, a family of four (with two young child) filing a joint tax return, had...
The Millers, a family of four (with two young child) filing a joint tax return, had the following information to prepare their federal income tax return for 2019: Total Income                                                        $110,000 State and local income taxes                                $6,000 Property tax                                                          $6,000 Home mortgage interest                                       $14,000 Contribution to charities                                       $4,000 Interest on student loans                                       $2,000 Contribution to their 401(k) retirement account: $10,000 For tax year 2019: Standard deduction for a married couple: $24,000; Child tax...
Nine multiple-choice questions, thanks. 1.Many homeowners have a choice between heating oil and natural gas to...
Nine multiple-choice questions, thanks. 1.Many homeowners have a choice between heating oil and natural gas to heat their houses in winter. Which of the following is most likely to increase the price of natural gas? A) An increased preference for solar-powered heating B) A fall in the price of heating oil C) The discovery of a new source of natural gas D) An unusually severe winter 2.Which is NOT a predictable result of making a market (such as for marijuana)...
1) Open market purchase will result in: increase in bank reserves and a decrease in the...
1) Open market purchase will result in: increase in bank reserves and a decrease in the federal funds rate. increase in bank reserves and an increase in the federal funds rate. decrease in bank reserves and a decrease in the federal funds rate. decrease in bank reserves and an increase in the federal funds rate. 2) An increase in government expenditure would shift the: A) aggregate demand curve rightward. aggregate demand curve leftward. aggregate supply curve rightward. aggregate supply curve...
SUMMARY THE PARAGRAPH Equity Accounting As noted above in the context of financial assets, difficulties can...
SUMMARY THE PARAGRAPH Equity Accounting As noted above in the context of financial assets, difficulties can arise when the standard setters invent ìprinciplesî that are not found in any conceptual framework and do not fit with other principles. An example relates to one of the most egregiously arbitrary rules in accounting: the use of a threshold interest of 20 percent of voting shares in the context of equity accounting. The alleged underlying principle of ìsignificant influenceî is sufficiently vague that...
Juanita is deciding whether to buy a skirt that she wants, as well as where to...
Juanita is deciding whether to buy a skirt that she wants, as well as where to buy it. Three stores carry the same skirt, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $129 for the skirt: Store Travel Time Each Way Price of a Skirt (Minutes) (Dollars per skirt) Local Department...
Pfizer was established in 1849 in Brooklyn, New York by cousins Charles Pfizer and Charles Erhart...
Pfizer was established in 1849 in Brooklyn, New York by cousins Charles Pfizer and Charles Erhart with a loan of $2,500 from Pfizer’s father.2 Today, 167 years later, Pfizer Inc. has international revenues of $49 billion, which makes it the second-largest pharmaceutical manufacturer in the world.3 Despite Pfizer’s success, the company has faced many challenges over the last few decades. The pharmaceutical industry is heavily influenced by legal, political, and technological forces, and all indications are that the industry will...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT