QUESTIONS
1. What is the Haig-Simons definition of income and why is it important?
2. How can the sales tax be proportional with respect to the base of consumption yet regressive with the base of income? Why is this important?
3. How should taxes be allocated, according to benefits received or ability to pay?
4. What is meant by tax expenditures? What is the rationale for two of them?
5. Illustrate and explain the dead weight loss that results from tax expenditures.
6. Which gives more benefits to higher income tax payers, tax deductions or tax credits? Explain.
7. What are two reasons why tax credits are better than tax deductions
8. What is the source of any wedge in any market and why is it important? Illustrate with an example and explain to someone unfamiliar with economics.
9. Why are most taxes likely to cause losses in efficiency?
10. Provide a graphical illustration showing that the incidence of a tax depends on the price elasticity of demand. Explain your analysis.
11. Provide a graphical illustration showing that the incidence of a tax depends on the price elasticity of supply. Explain your analysis.
12. Illustrate and explain how a budget deficits impact interest rates and in turn the level of investment. Evaluate the desirability of this outcome.
13. What one argument indicates that the national debt is not a major problem?
14. What one argument indicates that the nation debt is a major problem?
15. What would be one major advantage associated with having a flat tax?
16. What would be one major disadvantage associate with having a flat tax?
17. Explain the difference between average, marginal and effective tax rates. Also indicate when it is useful to use each one.
18. Why was the alternative minimum tax implemented? Is this a legitimate reason? Explain.
19. What is the major source of the marriage tax penalty?
20. What is the short-run incidence of the corporate income tax? Illustrate and explain.
21. What is the long-run incidence of the corporate income tax? Illustrate and explain.