Luxury goods often have much higher elasticities of demand than do goods purchased by a broad base of people. Why, then, are governments more likely to tax luxuries than these “staple” goods?
Answer to relevant QuestionsConsider a social insurance program that is financed by a payroll tax. How does the incidence of this tax differ if the benefits of the insurance program are restricted to workers, rather than if benefits are available to ...What is the theoretical justification for a so-called Laffer curve? Based on the empirical evidence described in the text, should the U.S. raise or lower its tax rates in order to increase tax revenues? Explain. What is likely to happen to overall labor supply if a. the Earned Income Tax Credit (EITC) compensation rate increases from 30% to 50% for each dollar earned? b. the rate of reduction in the EITC phase-out period increases? The National Bureau of Economic Research’s TAXSIM model (http://www.nber.org/ ~taxsim/taxsim-calc8/) allows you to calculate tax liabilities for a given individual in different years. Go to this Web site and fill in the ...Gale and Scholz (1994) estimate that increasing the contribution limits for Individual Retirement Accounts would have little effect on the overall rates of savings. Why do you think this might be the case?
Post your question