2. We want to determine the impact of the tax increase on federal gov- ernment revenues....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2. We want to determine the impact of the tax increase on federal gov- ernment revenues. Note the following: Federal revenue raised from the top bracket is Rf = Tf*N*(Z(T+ Tp)-Z), where we write Z(T+Tp) as a function of the top federal rate 7 and the top provincial rate Tp - For simplicity assume that the top provincial rate is the same for all provinces and that the threshold to be in the top tax bracket is equal to the federal threshold in all provinces. Throughout the following assume that N does not change in response to the change in the top federal tax rate, but Z does due to behavioural responses. The elasticity of taxable income with respect to the combined (federal plus provincial) top net-of-tax rate is: dz d(1 - Tj - Tp) 1- Tf - Tp Z (a) Derive a general formula for the change in federal tax revenue (dR) due to a change in the top federal tax rate (dry) (note that the provincial rate Tp does not change). This formula should distinguish between the mechanical and the behavioural effects of the tax change and will be a function of the various parameters. (10) == (b) Undertake numerical calculations of the impact of the tax change on federal government revenue under the following assumptions: Tf = .33, Tp = .15, dr;= .05, and Z, Z and N are from (1). Report your calculations in a table which reports the mechanical effect, the behavioural effect, and the total effect under three assump- tions regarding the elasticity of taxable income e = (0.25, 0.40, 0.70) (15) 2. We want to determine the impact of the tax increase on federal gov- ernment revenues. Note the following: Federal revenue raised from the top bracket is Rf = Tf*N*(Z(T+ Tp)-Z), where we write Z(T+Tp) as a function of the top federal rate 7 and the top provincial rate Tp - For simplicity assume that the top provincial rate is the same for all provinces and that the threshold to be in the top tax bracket is equal to the federal threshold in all provinces. Throughout the following assume that N does not change in response to the change in the top federal tax rate, but Z does due to behavioural responses. The elasticity of taxable income with respect to the combined (federal plus provincial) top net-of-tax rate is: dz d(1 - Tj - Tp) 1- Tf - Tp Z (a) Derive a general formula for the change in federal tax revenue (dR) due to a change in the top federal tax rate (dry) (note that the provincial rate Tp does not change). This formula should distinguish between the mechanical and the behavioural effects of the tax change and will be a function of the various parameters. (10) == (b) Undertake numerical calculations of the impact of the tax change on federal government revenue under the following assumptions: Tf = .33, Tp = .15, dr;= .05, and Z, Z and N are from (1). Report your calculations in a table which reports the mechanical effect, the behavioural effect, and the total effect under three assump- tions regarding the elasticity of taxable income e = (0.25, 0.40, 0.70) (15)
Expert Answer:
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
Students also viewed these economics questions
-
Risk Analysis and Management of Construction and Operations in Offshore Wind Power Project Abstract: Many countries have increased the use of renewable energy and strongly promoted offshore wind...
-
Dissertation Topic: "The Effects of Cybersecurity Measures on the Productivity and Well-being of Teleworkers in the Healthcare Industry". Introduction Draft no more than TWO paragraphs here -...
-
Suppose that, in a Brazilian municipality, theprobability that a randomly selected resident likessoccer is 1/4, while the probability that he likes soap operas is1/2. Determine the probability that 1...
-
In Problems, use the methods of (1) left Riemann sum, (2) right Riemann sum, (3) Trapezoidal Rule, (4) Parabolic Rule with n = 8 to approximate the definite integral Then use the Second Fundamental...
-
In Exercises, match the correct graph AF to the function without using your calculator. Then, if you have a graphing calculator, use it to check your answers. Each graph in this group shows x and y...
-
Many single women and married couples use donated sperm to conceive children each year. Pennsylvania resident Donna Donovan decided to use donated sperm from Idant Laboratories, a New York sperm bank...
-
On January 1, 2017, Geffrey Corporation had the following stockholders equity accounts. Common Stock ($20 par value, 60,000 shares issued and outstanding).. $1,200,000 Paid-in Capital in Excess of...
-
Suppose your starting salary is $50,000. You would like to open a savings account to save for your retirement and any large future expenses. Most Economists agree that you should allocate 20% of your...
-
The Ace Clothing Company has decided to diversify its operations by manufacturing and marketing footwear. Management notes that the systematic risk of the shares of a listed footwear company is 0.8....
-
Problem 04 A particle of mass m is in an infinite potential well of width a defined as V(x)= - {% -15*1 otherwise At time t = 0 the particle's wavefunction can is known to be (x,t= 0) = a(z) + 2(x)...
-
Solve the attached problem in the C++ language The country of Hackerland can be represented as a tree of g_nodes numbered from 1 to g_nodes where the ith edge represents a road that connects the...
-
What three things do businesses typically do when faced with increased risk from cross-border investments?
-
A New Suit Matthew Stringer is shopping for a new suit .At K andG Menswear ,he finds that the sale price of a suit that was reducedby 25% is $187.50. Find the regular price of the suit .
-
'If women are to have better financial well-being in later life, and reduce potential financially related gender inequalities, then they themselves need to have strong financial capability in early...
-
1. (a) Show that the graph in Figure 1 is planar (by drawing it without edge-crossings, and establishing that your drawing is the same graph as the one in Figure 1). (b) Show that the graph in Figure...
-
Clark, PA, has been engaged to perform the audit of Kent Ltd.s financial statements for the current year. Clark is about to commence auditing Kents employee pension expense. Her preliminary enquiries...
-
The statement of cash flows for Cash4Cars Ltd follows. Ignore GST. Required (a) Explain the information that would be presented in Note 29 of Cash4Cars Ltds financial statements. (b) Explain the...
-
Below are the comparative statements of financial position of Lithium Ltd. Additional information 1. Income statement details were: sales revenue $750 000; cost of sales $603 000; expenses $116 360...
-
Karen Broderick commenced business on 1 July 2018. On 30 June 2019, she found that she had written off debts amounting to $1875. In addition, she found it necessary to create an allowance for...
Study smarter with the SolutionInn App