Chapter One. Questions and Exercises

Transcription

1 Chapter One 1. a. Yes. Total project benefits (2,700) exceed total project cost (2,500). b. No. Residents C, D, and E received less individual benefit than their assigned costs. c. No. Residents C, D, and E are harmed. d. Revise cost shares so that Residents A and B pay more and reduce cost shares borne by C, D, and E. For example, if A and B paid 741, C paid 278, D paid 324, and E paid 416, all would be receiving greater individual benefit than their individual cost. 3. Many of the benefits of primary and secondary education are public or social (external to the recipient of the education). The entity paying for the service is not able to capture the full benefit of the service. 4. No the bread is rival and exhaustible. Chapter Seven 2. Examination of progressivity requires comparison between tax paid and incomes of the taxpayers. The comparison between shares of tax paid and shares of the population is not helpful without knowing the shares of income. If the highest 1 percent of income earners paid 33.6 percent of federal income tax but received 75 percent of income, that comparison between 1 percent and 33.6 percent would not look particularly impressive. Inferences about vertical equity require information about the shares of income in addition to shares of tax paid.

2 Chapter Eight 2. a. Blue and Jones: state liability decreases by $50 for each. b. Federal deductions increase by $100 (charitable deduction) and decrease by $50 (state income tax). Federal taxable income thus falls by $50. Taxability for Blue: $50 x.15 = $7.50 less. Tax liability for Jones: $50 x.35 = $17.50 less. c. Blue: $100 - $50 - $7.50 = $42.50 Jones: $100 - $50 - $17.50 = $32.50 d. Blue and Jones: $100 x.03 = $3 tax decrease e. Universities would prefer credits because they make the net cost of a gift to the university less and almost certainly would increase the total amounts given investments. 3. Brown: After tax return for municipal bond: 5% After tax return for corporate bond: 6.5% x (1 -.10) = 5.85% Black: After tax return for municipal bond: 5% After tax return for corporate bond: 6.5% x (1 -.35) = 4.225% Brown: invest in corporate. Black: invest in municipal. 4. a. AGI = 65, ,000 = 66,000 b. Taxable Income = 66,000 Standardized Deduction of 11,400 - Personal Exemptions of (3 x 3,650) = 43,650 c. Tax = 5,716 d. Average tax rate = 5,716/43,650 = 13.09% e. Average effective-tax rate = 5,716/66,000 = 8.66% f. Marginal tax rate = 5. AGI = 112, ,500 = 114,500 TI = 114,500 8,000 3,200 = 103,300 Note: a. Tax = 8, (103,300 65,100) = 18, b. Average effective-tax rate = 18,512.50/114,500 = 16.17% c. Average tax rate = 18,512.50/103,300 = 17.92% d. 25% e. Liability change = 800 x.25 = 200 f. $250

3 Chapter Nine 3. Alcoholic Beverages Tobacco Lowest 176/10,531 = 1.67% 259/10,531 = 2.46% Second 272/27,674 = /27,674 = 1.22 Third 413/46,213 = /46,213 = 0.82 Fourth 506/72,460 = /72,460 = 0.51 Highest 917/158,388 = /158,388 = 0.17 Both are significantly regressive. 5. a. Farmer to textile company 20 (V.A.) + 2 (tax) = $22 price to textile company Textile company to sweater manufacturer (V.A.) (tax) = $57.20 price to sweater manufacturer Sweater manufacturer to retailer (V.A.) (tax) = $ price to final customer TOTAL PRICE = $ VALUE ADDED (or VALUE NET OF TAX) = 200 TOTAL TAX PAID = = EFFECTIVE TAX RATE = 36.61/200 = 18.3 If manufacturer and retailer merge: Farmer to textile company = $22 Textile company to sweater manufacturer = Manufacturer to final customer (combined value added) (tax) = TOTAL PRICE = $ The vertical integration provides a considerable price advantage. 6. a. Tax Inclusive Rate = 8.25 / ( ) = 7.62 percent b. Tax Owed = (12,325)(.0762) = 939

4 Chapter Ten 2. Property is only reassessed when sold, resulting in increased assessed value and property tax burden of those moving into the neighborhood compared to long-time residents. 4. Fair Cash Value (in Thousands) Nixon 69,535 BOONEVILLE 163,842 Reagan 35,000 S.U.S.D. 203,484 Davis 112,170 Y.S.C. 131,826 G.C. 91,314 Navaho 27,291 COUNTY 335,310 a. Central County: 3,428/(335,310 / 2) = $2.045 Booneville City: (4, ) / (163,842 / 2) = 3789/81,921 = $4.625 Nixon: 99/(69,535 / 2) = $0.285 Reagan: 150 / (35,000 / 2) = $0.857 Davis: 250 / (112,170 / 2) = $0.446 Greasy Creek: 175 / (91,314 / 2) = $0.383 Navaho: 83 / (27,291 / 2) = $0.608 Seagram United: 6,350 / (203,484 / 2) = $6.241 Yeltsin Cons: 3,800 / (131,826 / 2) = $5.765 b. Assessed Value = 120,000 / 2 = 60,000 Taxing Unit Rate Tax Owed Booneville ,775 Davis Township Central County ,227 Seagram United TOTAL c. Assessment Ratio = 60,000 / 225,000 = 26.7% Effective Rate = x = 3.566

5 d. Seagram United: (203,484 / 2) / 1,800 = 56,523 per pupil 1% yields $ per pupil Yeltsin Consolidated: (131,826 / 2) / 600 = 109,855 per pupil 1% yields $1, per pupil Some tax effort yields dramatically different revenue results in the two districts. e. New Base (Thousands) Rate Navaho Township (27, ,000) / 2 = 19,646 $0.422 Yelstin S.C. (131, ,000) / 2 = 71,913 $5.284 County (335, ,000) / 2 = 173,655 $ Bill = (12,000,000 / 2) x.07680= $460,800 f. New A.V. New Levy Rate County 335,310 3,428 x 1.03 = 3, Davis 112, Booneville 163,842 (4, ) x 1.03 = 3, Seagram Unit. 203, x 1.03 = 6, TAX BILL = 120,000 x = 8,246.4 (Note: slightly higher because levies were allowed to increase) 5. Property Tax Yield Estimate: 16,500 acres * $60/Acre Assessed Value = 990, ,000 *.6 = 594,000 * , ,000 *.4 = 396,000 * , Total Property Tax: 16, So payment is somewhat above property tax equivalent.

6 Chapter The systems do not differ at all in terms of incentives because the actions of an individual user will not reduce that user s wastewater payment. Property value determines payment in the one case; national conditions determine payment in the other. In neither instance will conservation steps taken by a user have a direct effect on the charge it pays. Chapter Central Government: General Public Service; Defense; Economic Affairs; Social Protection Subnational Government: Public Order and Safety; Housing and Community Amenities; Health; Recreation, Culture, and Religion; Education