Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 31.3, Problem 2ST
To determine
Reasons for the interest of political candidates to speak in general terms.
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In 1989, Senator Bob Packwood asked Congress’s Joint Committee on Taxation how much extra revenue the government would raise if it just started taxing 100% of all income over $200,000 per year. The Joint Committee crunched some numbers and reported an answer: $204 billion per year.
a. What is wrong with this answer?
In 1989, very few people made over $200,000 a year, so the estimate of the tax revenue is far too high.
Increasing government spending by $204 billion each year would have generated economic growth, and subsequently even higher amounts of tax revenues.
The Joint Committee on Taxation did not have the tools needed to make such an estimate accurately.
No one would have an incentive to work once they had earned $200,000, so much of the taxable income would disappear.
Your Finance Minister considers making a tax reform. He asks you, as a senior tax administrator, to advise him on the requirements from a good tax system. What would you advise him?
All of the following statements are true about median voter theory, except:
Select the correct answer below:
The median voter is in the middle of the political spectrum.
The effects of the U.S. sugar lobby supports median voter theory.
Median voter theory suggests that if a candidate needs more than 50% to win an election, the best
way to win is to have median preferences.
The median voter theory argues that politicians will try to match policies to what pleases the
median voter preferences.
Chapter 31 Solutions
Economics (MindTap Course List)
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Similar questions
- What is your take on the amount of money politicians spend on political campaigns? Does it have a positive/negative impact on the economy?arrow_forwardPLEASE HELP ASAP!!! WILL GIVE THUMBS UP!arrow_forwardSuppose there are five voters. Their preferences for the amount the federal government should spend to stimulate the economy are shown in the figure to the right. According to the median voter theorem, in a vote, how much will the federal government spend to stimulate the economy? The federal government will spend S billion. (Enter your response as an integer.) 1200 1100 1000- 900- 800- 700- 600 2500- 400- 300- 200- 100- Greg kelly Christina Luisarrow_forward
- Who would have been most likely to vote Republican in the late 19th century?arrow_forwardWhich of the following is NOT a reason that governments impose taxes? To finance government spending To influence the behavior of households and firms To alter the distribution of income in society These are all reasons why governments impose taxesarrow_forwardLet's walk through the median voter theorem in a little more detail. Consider a town with three voters, Enrique, Nandini, and Torsten. The big issue in the upcoming election is how high the sales tax rate should be. As you'll learn in macroeconomics (and in real life), on average, a government that wants to do more spending has to bring in more taxes, so "higher permanent taxes" is the same as "higher government spending." Enrique wants low taxes and small government, Nandini is in the middle, and Torsten wants the biggest town government of the three. Each one is a stubborn person, and his or her favorite position-what economic theorists call the "ideal point-never changes in this problem. Their preferences can be summed up like this, with the x denoting each person's favorite tax rate: Enrique 0% N O Sales tax rate Nandini P Torsten 20% Suppose there are two politicians running for office, N and O (so ignore P for now). Enrique will vote for Choose your answer. Nandini will vote for…arrow_forward
- How can tax incidences have a positive and negative impact on the economy?arrow_forwardAccording to the textbook, which of the following statements is (are) correct?(x) As a nation gets richer, the government typically takes a larger share of income in taxes. (y) In 1902 the government (federal, state and local) in the U.S collected about 7 percent of total income in taxes and in current times, it collects around 26 percent of income in taxes (z) In the early 2000s, the U.S had a larger tax burden, as a percent of income, then all of the major economies in Europe. (x), (y) and (z) (x) and (y) only (x) and (z) only (y) and (z) only (z) onlyarrow_forwardWhat is Proportional Tax?arrow_forward
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