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1. Most economists agree that taxes should be designed with broad bases and relatively low tax rates – so-called BBLR. Explain why low tax rates and comprehensive tax bases lead to economically efficient taxation. [First, define what is meant by economically efficient taxation.]
2. On the other hand, some tax deductions, such as charitable deductions, produce social benefits and warrant deducting them from the individual income tax. Explain the inframarginal revenue losses and the marginal gains from charitable tax deductions.
3. In Tax by Design, James Mirrlees and his collaborators make the following statement: The fiscal system (tax and expenditures) can be progressive even when each tax is not progressive. In fact, most of the progressivity in a fiscal system comes from the expenditure side of the budget and to a lesser extent from the tax side. Explain what they mean in the context of what you know about tax burdens and expenditures in the United States.
4. Explain the following statement: When a person’s wages increase, an income effect will mean that a person will likely work fewer hours. Show the income effect on a graph.
5. Explain the following statement: When a person’s wages decrease, a substitution effect will induce a person to work fewer hours. Show the substitution effect on a graph.
The post Explain the following statement: When a person’s wages increase, an income effect will mean that a person will likely work fewer hours. Show the income effect on a graph. appeared first on Scholar Writers.
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