Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 6: Q 6.3 (page 124)

Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect.

Short Answer

Expert verified

They can influence the relationship by implementing various schemes such as sales tax, static tax analysis, and dynamic tax analysis.

Step by step solution

01

Step 1. Definition of Tax rates.

The proportion of tax base that has to be paid to the government is known as tax rate.

02

Step 2. The relationship.

They can influence the relationship by implementing various schemes such as

(a) Sales Tax - Government can impose a tax on the sale of goods and services that consumers are willing to purchase.

(b) Static Tax Analysis - Change in tax rate has no influence on the tax base. The increase in tax rate will not affect the tax base as it will remain the same.

(c) Dynamic Tax Analysis - The change in the tax rate should affect the tax base. The higher the tax rate the lower the tax base and vice versa.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Why is the main objective of these cross border mergers, whether the US firm is the acquirer or the company that is acquired, to change the legal domicile of the merged firm from the standpoint of income taxation .

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.

The British government recently imposed a unit excise tax of about$154 per ticket on airline tickets for flights to or from London airports. In answering the following questions, assume normally shaped demand and supply curves.

a. Use an appropriate diagram to predict the effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.

b. What do you predict is likely to happen to the equilibrium price of tickets for air flights into and out of cities that are in close proximity to London but are not subject to the new ticket tax? Explain your reasoning.

6-3. Consider the table below when answering the following questions. Show your work, and explain briefly.

a. What is Christino's marginal tax rate?

b. What is Jarius's marginal tax rate?

c. What is Meg's marginal tax rate?

Aseniorcitizengetsapart-timejobatafast-food

restaurant.Sheearns\(8perhourforeachhoursheworks,andsheworksexactly25hoursperweek.Thus,hertotalpretaxweeklyincomeis\)200.Hertotalincometaxassessmenteachweekis\(40.Shepays\)3intaxesforthefinalhoursheworkseachweek.

a. What is this person's average tax rate each week?

b. What is the marginal tax rate for the last hour

she works each week?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free