1. Why might revenues generated from the tax fall short of expectations?2. Do you think that Philadelphia should or shouldn't have adopted the tax to fund pre-K education? Support your brief argument witheconomic concepts covered in the course.3. Suppose a government wants to use tax policy to persuade people to not consume certain products or services. Suppose, thegovernment has limited resources and can only enforce (or collect) a limited number of taxes. Should that government target goods orservices that have an elastic or inelastic price elasticity of demand (ED)? Why?4. Suppose the goal of a government is to raise as much money as possible to fund governmental services. Should the government targetgoods and services that have an inelastic or elastic ED? Why?

1. We all have desires and needs. However, current incomes may not be sufficient to meet all of the…

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1. Why might revenues generated from the tax fall short of expectations?

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Design Of The Tax System

Section: Chapter Questions

Problem 1CQQ

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Question

1. Why might revenues generated from the tax fall short of expectations?
2. Do you think that Philadelphia should or shouldn't have adopted the tax to fund pre-K education? Support your brief argument with
economic concepts covered in the course.
3. Suppose a government wants to use tax policy to persuade people to not consume certain products or services. Suppose, the
government has limited resources and can only enforce (or collect) a limited number of taxes. Should that government target goods or
services that have an elastic or inelastic price elasticity of demand (ED)? Why?
4. Suppose the goal of a government is to raise as much money as possible to fund governmental services. Should the government target
goods and services that have an inelastic or elastic ED? Why?

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13. "We should impose a 20 percent luxury tax on expensive automobiles (those with a sales price of $75,000 or more) in order to collect more tax revenue from the wealthy." Will the burden of the proposed tax fall primarily on the wealthy? Why or why not?
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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.