1. To help cover the center's deficit, the city is considering two revenue proposals: a) (6 points) Adopting a sliding scale fee based on annual family income. Assume that city employees can be grouped into three income classes:

Low income (below $45,000): average $37,000/year Middle income ($45,000-65,000): average $58,000/year High income (above $65,000): average $72,000/year

and that city workers are evenly divided between these income classes. The new fee structure requires that low-income families pay $600 per month per child, middle-income $650, and high-income $700.

Is this fee progressive, regressive, or proportional? Why? Discuss the pros and cons of this fee in the memo (hint: refer to the principles of sound taxation discussed in class).

b) Since the state start-up grant is gone in 2023, the city is considering subsidizing the daycare center through property taxes, possibly $8,000 per month. Is this a good idea? Explain in the memo (hint: refer to the principles of sound taxation)