Many employers sponsor “cafeteria” plans. These plans allow employees to have some of their earnings put into an account that can be used for medical expenditures incurred in that tax year. The income put in this account is not considered part of the individual’s tax base. In what ways is it desirable to exclude this income from the tax base? In what ways is it undesirable?
Answer to relevant QuestionsProfessor Slither attended the Antarctic Economic Association meetings. She is able to fully deduct from her taxes the hotel expenses that she incurred, but can deduct only half of the meals expenses that she incurred. Why ...Suppose that the government adopts a Haig-Simons comprehensive income definition. Will this make employers more likely or less likely to offer employer-provided pension plans or health insurance coverage? Why? The demand for rutabagas is Q = 2,000 – 100P and the supply of rutabagas is Q = –100 + 200P. Who bears the statutory incidence of a $2 per unit tax on the sale of rutabagas? Who bears the economic incidence of this tax? Consider the changes over time in the U.S. effective tax rates presented in Table 19-1. How did the total effective tax burden change for the lowest and highest deciles of the population between 1979 and 2006? How did the ...Suppose that the government of Michconsin imposes a tax on cheese curd production. When will the efficiency costs of the tax be greater, in the short run or in the long run—and why?
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