Chapter 6: Q. 6.12 (page 140)
Between 2017 and 2018, the income received by a company located in a city rose from \(5,000,000 to \)6,000,000. The annual city income taxes that the company paid increased from \(250,000 to \)500,000. What was the company's average city income tax rate in each year?
5% and 8.33%
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Why might pressures to satisfy government budget constraints give state governments incentives to seek to tax remote sales even if they were to determine that actual net revenues collected likely would be less than originally estimated?
To raise funds aimed at providing more support for
public schools,astate government has just imposed
aunit excise tax equal to\(4for each monthly unit
of wireless phone services sold by each company
operating in the state.The following diagram
depicts the positions of the demand and supply
curves for wireless phone services before the unit
the excise tax was imposed. Use this diagram to deter
mine the position of the new market supply curve
now that the tax hike has gone into effect.
a.Does imposing the \)4-per-month unit excise tax
cause the market price of wireless phone ser
vices to rise by\(4per month?Why or why not?
b.What portion of the \)4-per-month unit excise
tax is paid by consumers? What portion is paid
by providers of wireless phone services?
Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect.
Consider Figure 6-3. Suppose that the government raises its sales tax from 6 percent to 8 percent. Are the predictions of static analysis and dynamic tax analysis in agreement on the direction of the change of government's tax revenue? Explain briefly.
What was the company's marginal city income tax rate in 2018? Did this company experience proportional, progressive, or regressive taxation? Explain briefly.
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