One may view the income tax system in the United States as the largest system of cost allocation in the world because the tax system is used to allocate the cost of the government to the people. Assume that the tax system in the United States is mildly progressive in that people who make more money pay relatively larger portions of their income to the government. As discussed in the text, four criteria may be used to identify a basis for cost allocation: benefits received, causal re¬ lationships, fairness or equity, and ability7 to bear.

a. Which of the four allocation criteria justifies a progressive form of income tax as a basis to allocate the costs of government to the people?

b. Identify two alternatives to the income tax system to allocate the costs of government to the people.

c. Is an income tax an ethical basis to allocate governmental costs?

d. What ethical dilemmas are created for citizens (who are also taxpayers) when governmental costs are allocated via an income tax?

LO1