Exam 18: Public Choice, Taxes, and the Distribution of Income

Article Summary In 2012, Colorado and Washington legalized marijuana for recreational use, and one of the major selling points in each state's pro-marijuana campaign was the possibility of generating millions of dollars in tax revenue from sales which could be used for funding general education. The Colorado legislature was weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent an excise tax on growers. Washington has set a tax rate of 44 percent on consumers and 25 percent each for growers and retailers. Since the legalization of marijuana is relatively new, projecting the economic impact of its sale is difficult, leading to many questions as to the quantities that will be produced and sold and what actual tax revenues will be generated. Source: Elizabeth Dwoskin, "Colorado and Washington Try to Figure Out How to Tax Marijuana," Bloomberg Businessweek, April 26, 2013. -What is the United States government's formal definition of the poverty line?

The largest percentage of federal income tax revenue in the United States is paid by the

Public schools in the United States get most of their operating funds from

Table 18-2 -The Arrow impossibility theorem

In the United States,

Article Summary In 2012, Colorado and Washington legalized marijuana for recreational use, and one of the major selling points in each state's pro-marijuana campaign was the possibility of generating millions of dollars in tax revenue from sales which could be used for funding general education. The Colorado legislature was weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent an excise tax on growers. Washington has set a tax rate of 44 percent on consumers and 25 percent each for growers and retailers. Since the legalization of marijuana is relatively new, projecting the economic impact of its sale is difficult, leading to many questions as to the quantities that will be produced and sold and what actual tax revenues will be generated. Source: Elizabeth Dwoskin, "Colorado and Washington Try to Figure Out How to Tax Marijuana," Bloomberg Businessweek, April 26, 2013. -Refer to the Article Summary. Colorado is weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent would be an excise tax on growers. Suppose the actual burden of the tax falls 80 percent on consumers and 20 percent on producers. In this case, consumers will actually bear the tax burden of ________ percent of the selling price and producers will actually bear the tax burden of ________ percent of the selling price.

Horizontal equity means that two people in identical economic situations should pay the same amount of taxes.

The Arrow impossibility theorem explains

What is meant by "tax incidence"?

Table 18-12 Table 18-12 shows income distribution data for two countries. Use this data to answer the following questions. -Refer to Table 18-12. a. Draw a Lorenz curve for each country. b. Which country has the more equal distribution of income? c. Based on the Lorenz curve for the two countries, can you determine which country has the more progressive tax system? Explain your answer.

The median voter model implies that

All of the following occur whenever a government taxes a product except

Which of the following is a transfer payment?

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax. Which of the following would have the most impact on who bears the burden of an excise tax?

Table 18-8 Table 18-8 shows the amount of taxes paid on various levels of income. -Refer to Table 18-8. The tax system is

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

Figure 18-5 Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5. The highest 20 percent of households

Article Summary In 2012, Colorado and Washington legalized marijuana for recreational use, and one of the major selling points in each state's pro-marijuana campaign was the possibility of generating millions of dollars in tax revenue from sales which could be used for funding general education. The Colorado legislature was weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent an excise tax on growers. Washington has set a tax rate of 44 percent on consumers and 25 percent each for growers and retailers. Since the legalization of marijuana is relatively new, projecting the economic impact of its sale is difficult, leading to many questions as to the quantities that will be produced and sold and what actual tax revenues will be generated. Source: Elizabeth Dwoskin, "Colorado and Washington Try to Figure Out How to Tax Marijuana," Bloomberg Businessweek, April 26, 2013. -What is the poverty rate?

What are the two types of taxes that working individuals pay on their earnings?

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax