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1 1725/2019 Assignment 3 Assignment 3 Submit Assignment Due Wednesday by 6pm Points 100 Available Nov 20 at 12am - Nov 30 at 11:59pm 11 days Submitting a text entry box or a file upload Assume that the mayor of your city is concerned about the property tax burden on low-income households. She has asked you to analyze two proposals: W (1) Homestead exemption of $10,000 on assessed value of owner-occupied residential property. (2) A circuit breaker, which is a credit for high property tax burdens on the state income tax. The circuit breaker credit (CB) is equal to (PT - b*1), where PT is property taxes, I is income, b is the share of income considered to be a high property tax burden. When actual property taxes (PT) exceed the acceptable property tax burden (b/), the difference is the income tax credit; if bl > PT, then the credit is set equal to zero. The property tax burden parameter (b) is equal to 7% if income is below $20,000, 8% if income is $20,000 and $30,000, 9% if income is between $30,000 and $40,000, and 10% for incomes above $40,000. She has asked you to compare the impact on two typical households: Low-Income Homeowner Upper-Middle Income Homeowner Total Income $15,000 $50,000 Actual Market Value $60,000 $150,000 Assessed Value $30,000 $50,000 -nominal property tax rate: 5% of assessed value each household has 4 family members -The state has a flat income tax with a rate of 8% on all taxable income. For simplicity, you can assume that taxable income equals total income. Using this information answer the following questions. 1. Calculate the property taxes paid by each household and the "effective tax rates" (total taxes divided by market value) for the following three cases: (a) without the homestead exemption or circuit breaker; (b) with the homestead exemption of $10,000; https://fiu.instructure.com/courses/49145/assignments/651403?module_item_id=2114299% R B O G C H Assignment 3 2/2019 ") with the circuit breaker. 2. Compare the impact of these two proposals (homestead exemption and circuit breaker) on horizontal and vertical equity relative to the present system