OPTION2 taxes.docx

OPTION 2 – Taxes

 

It has been said that nothing in life is guaranteed except for death and taxes. The next questions ask about the three tax structures as well as rate rates.

A lot of students say that some people pay “more (or less) in taxes” than others, but they often confuse tax rates (in percentages) with the amount of tax paid (in dollars). Be sure to answer questions in this option with references to the differences between taxes paid in dollars versus percentages.

1) Please state whether you prefer a progressive, regressive, or flat (proportional) tax system and WHY. Is your preference more in accordance with the concept of equality of opportunity (which is equal treatment) or equality of outcome (which is unequal treatment)? BE SPECIFIC. Which tax system incentivizes taxpayers to earn more money and which structure disincentivizes taxpayers to work harder and earn more money.

2) Please write about marginal tax rates and whether you believe they need to be changed in general. More specifically,

A) If you believe in a flat tax rate system, should income tax rates be raised or lowered?

B) If, however, you think a progressive tax rate is best:

i) should taxes on low-income earners be raised or lowered?

ii) should taxes on average-income earners be raised or lowered?

iii) should taxes on high-income earners be raised or lowered?

C) If, however, you think a regressive tax rate is best:

i) should taxes on low-income earners be raised or lowered?

ii) should taxes on average-income earners be raised or lowered?

iii) should taxes on high-income earners be raised or lowered?

Regardless of which you chose (A, B, or C) be sure to give your reasons WHY you feel the way that you do.

3) Please explain HOW the tax rate changes (the increase or decrease you advocated for in Questions #2 above) will affect EACH of the following:

a)  economic growth: job creation, investment, incentives to work more, and tax avoidance

b)  the budget: the difference between tax revenue and government spending

c) economic “fairness”

 

Your answer needs to have a discussion related to the Laffer Curve, especially with respect to the budget (and to government revenue in particular). In addition, please give your definition of economic “fairness” and WHY you believe that.

4) Please watch the following two videos:

Describe the main points of each video in detail. Which video do you agree with more? Please describe WHY. Which video recommends treating people equally and which one does not?

5) Please read the following articles and graphs:

Tax Foundation: Effective tax rates per income category

Income tax share by income category

Describe the main points of each article or graph in detail.

Based upon these articles and graphs: By income percentile group, who doesn’t pay their “fair share” of taxes and who pays more than their “fair share” in your opinion? How do you arrive at that opinion?

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