Whether there is a tax progressiveness for the two people in a society.

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Answer 1

Question

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

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Is taxing the rich better?

Question 1: This question asks you to reconsider the model of optimal sin taxes that we studied in class with a different distribution of types. Assume that everyone has p 65 and y= 40. Assume further that proportion o of the population has B = 0.85 while proportion 1– o has B = 1 (both types have 8 = 1). (a) As a function of o and t, what is the uniform lump-sum transfer? (b) As a function of o and t, derive an expression for social welfare. (c) Solve for the optimal tax. (d) How does the optimal tax depend on ø? Provide some intuition for this answer.

Answer 2

Question

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

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Answer 3

Question

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

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Answer 4

Question

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

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Answer 5

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

Answer 6

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

Answer 7

Chapter 14, Problem 2DQ

Summary Introduction

To determine: Whether there is a tax progressiveness for the two people in a society.

Answer 8

Expert Solution & Answer

Explanation of Solution

According to Person X the taxes will not be progressive, if the rich as well as the poor has lost the similar amount of utility, then the payment made by the rich person will be higher because of the marginal utility of income that is diminishing. On the other hand, the progressive taxes need a huge part of the income that has to be taken from people who are rich (this mainly refers to the average rate of tax). This kind of tax plan only needs the absolute amount to be more and not the amount that is proportional. For example, if there is a decline in the marginal utility, however very nearest to the constant then the poor and rich might make a payment closest to the similar amount in the taxes and this payment would be a large part of money in the income of a poor person.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 14 - Prob. 2DQ

Whether there is a tax progressiveness for the two people in a society.

Concept explainers

To determine: Whether there is a tax progressiveness for the two people in a society.

Explanation of Solution

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Chapter 14 Solutions