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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Question
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?
In a response to public outcry over the Internal Revenue Service's (IRS) extent and abuse of power, the Federal government has decided to disband the IRS in favor of creating a new administrative agency to oversee taxation. As a business owner, what steps might you be able to take to ensure there are control's and limits to the agency's power? How does this compare with the controls available to branches of the government?
Chapter 19 Solutions
Principles of Economics (12th Edition)
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