Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 19, Problem 2.1P
To determine
Identify the role of corporation income tax and the individual income tax in an economy.
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The Principles of Taxation
Taxation systems are centered around two basic ideas. One is that people that benefit from services provided by tax revenues should be the ones who pay for them. Secondly, taxes should be paid in proportion to the number of benefits or services that an individual receives.
Three Types of Taxes
Taxes can be proportional, progressive, or regressive in nature.
A proportional tax is equal in that it sets the same percentage of income taxation on everyone regardless of income. So for individuals, as their income rises or falls, they pay the same percentage in tax.
A progressive tax imposes a higher percentage rate of taxation as incomes go up. So as people make more money they pay a higher percentage of that income in tax, and the percentage goes down if their income goes down.
Regressive taxes are the opposite of progressive. They impose a higher percentage of taxes on lower incomes than on higher incomes. Often these taxes are not income taxes, but other types…
Why is taxation considered as the strongest among the three inherent powers of the State?
This discussion question has two parts, a and b. Be sure to answer both parts: a.) Explain reasons sales tax is basically equitable or
not equitable by discussing the hypothetical example below. b.) Explain what makes sales tax an example of a regressive,
progressive, or flat tax by explaining how it differs from the other two types of taxes.
Chapter 19 Solutions
Principles of Economics (12th Edition)
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- Explain briefly the three main purposes in exercising taxation power.arrow_forwardWhat are some examples of goods subject to selective sales taxes?arrow_forwardThe federal government currently uses many forms of taxation, both direct and indirect, to raise revenue. Would it not be more effective and less burdensome just to employ a single tax? What would you consider to be a more effective and efficient system of raising revenue?arrow_forward
- Explain the types of tax liability in the Turkish Tax System by giving examples.arrow_forwardWith a general utility function, explain why moving from a proportional tax to a lump sum tax would increase consumer welfare, if they raise same amount tax revenue.arrow_forwardCritically examine the principles of taxation and point out the difficulties in their practical application.arrow_forward
- Describe the two basic philosophies of taxation fairness. How are these philosophies evident in the U.S federal tax system?arrow_forwardWhat are the two fundamental doctrines of tax equity?arrow_forwardGive typing answer with explanation and conclusion The burden of a sales tax will fall primarily on businesses because sales tax is collected from businesses. true or false?arrow_forward
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