Most economists believe that a reduction in all statutory federal income tax rates in the United States would be unlikely to generate an increase in tax revenues. However, a recent study suggests that this might not be the case for the tax systems in certain cities. Why might a reduction in tax rates be more likely to increase revenues at the city level rather than the federal level?
Answer to relevant QuestionsSuppose that individuals view their loss of income from income taxes as offset by the benefits of public services purchased with the revenues. How are their labor supply decisions affected? In the face of reduced interest rates, one financial columnist gave the following advice: “To compensate for such modest returns, aim to save even more every month” [Clements, 2003]. Use the life cycle model to evaluate ...Several years ago, RJR Nabisco incurred $ 2 million in costs for package design— the physical construction of a package and its graphic design. Nabisco wanted to deduct the entire $ 2 million in the year it was spent; the ...In 2010, the Greek government considered selling its stakes in a bank, a betting company, and a telecommunications company to reduce its budget deficit. Do you think this is a sensible approach to reducing the Greek deficit? ...Ramesh lives two periods. His earnings in the present are 100; in the future they are 75.6. The interest rate is 8 percent. a. Suppose that Ramesh’s earnings are subject to a 25 percent tax. Suppose also that interest ...
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