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Chapter 6: Q. d (page 133)
Why is there always a difference between static analysis and dynamic analysis of tax changes?
Yes.
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Between 2017 and 2018, a small businessperson's income increased from \(200,000 to \)220,000. The annual state income taxes that she paid increased from \(5000 to \)5500. What was her average state income tax rate in each year?
Why do you suppose that economists commonly refer to the elimination of all disability payments from the people able to work part time as a 'tax' imposed on disabled individual who is willing and able to earn part time income.
The following information applies to the market for
a particular item in the absence of a unit excise tax:
a.According to the information in the table,in the
absence ofaunit excise tax,what is the market
price?What is the equilibrium quantity?
b.Suppose that the government decides to subject
producers of this item toaunit excise tax equal
to$2per unit sold.What is the new market
price?What is the new equilibrium quantity?
c.What portion of the tax is paid by producers?
What portion of the tax is paid by consumers?
Consider Figure 6-3. Suppose that the government raises its sales tax from 6 percent to 8 percent. Are the predictions of static analysis and dynamic tax analysis in agreement on the direction of the change of government's tax revenue? Explain briefly.
Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect.
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