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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?

Short Answer

Expert verified

Yes.

Step by step solution

01

Step1. Given information

Tax changes impacts static and dynamic analysis differently.

02

Step2. Explanation

Static analysis merely takes into account the change in tax. But dynamic, as the word suggests, is broader in sense. It takes into account not just the change in tax, but also the change in the population base which is taxed corresponding to the change in tax.

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Most popular questions from this chapter

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?

Why might people be willing to sacrifice dollars to avoid "feeling bad" about flouting tax laws?

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?

Given that in recent years, the governments of many nations have been reducing corporate income tax rates in relation to the US rate (which remains one of the world's highest), is the US tax base shrinkage likely to slow down or speed up? Explain.

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?
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