ECON4540 Short Assignment 4 DUE: Tuesday May 1, 2007
Part I (10 points each)
1. If the economic incidence of a tax is different from its legal assignment does that mean a law is being broken? Explain.
2. What are some of the generally accepted principle goals of tax design?
3. Give an example of how the principles of tax design can conflict with each other.
4. What is the Haig-Simons definition of income? Give some examples of income that are difficult to measure or tax.
5. Which industry structure, monopoly or perfect competition, is more likely to pass a tax on to the consumer? Why?
6. Define regressive, progressive, and proportional taxes.
7. What is meant by the excess burden of a tax?
8. What are some of the factors that influence the magnitude of excess burden from a tax?
9. If a tax does not generate any revenue, does that mean it does not have any social cost? Explain.
10. Using the 2006 Federal tax Rate Schedules: a) If a single person with no children, John Doe, has taxable income of $74,200 how much does he owe?
b) If John marries a person with no children who has taxable income of $0 how much do they owe?
c) If John marries a person with no children who has taxable income of $74,200 how much do they owe?
d) Which of these situations (b or c) can be thought of as an example of a marriage subsidy? In that example what is the dollar value of the marriage subsidy?
e) Which of these situations (b or c) can be thought of as an example of a marriage tax? In that example what is the dollar value of the marriage tax?