Imagine that while cleaning out your great-grandfather's attic, you find a rucksack containing a journal and a sheaf of papers. Your great-grandfather, a noted entrepreneur and businessman, was also an accomplished amateur explorer. The journal, which appears to be written in your great-grandfather's hand, is a diary describing a series of visits to a small uncharted island called Rodos, in the northern Atlantic during the late 1800s. The journal and papers contain notes made during his conversations with Valdimar, king of Rodos, when they discussed the kingdom's business and economic conditions. The sheaf of papers accompanying the journal describes several potential revisions to the Rodosian personal and business tax code, including replacing the existing system with a progressive tax system, the assessment of different luxury and sin taxes, and/or modifications of the provisions of the current system Two of the specific proposals include the following: Policy Proposal 1: Replace the existing system with a progressive tax system that would tax business and individuals, using these schedules: Business Tax Rates You Pay This Amount on the Base of the Bracket SRO SR500,000 SR1,250,000 SR3,250,000 SR8,250,000 Plus This Percentage on If your Taxable Income Is Up to 5,000,000 5,000,000-10,000,000 10,000,000-20,000,000 20,000,000-40,000,000 Over 40,000,000 the Excess over the Base 10% 1 5% 20% 25% 30% Personal Tax Rates You Pay This Amount on the Base of the Bracket t Plus This Percentage on Excess over the Base If your Taxable Income Is Up to 6,000 6,000-24,000 24,000-50,000 Over 50,000 SR300 SR2,100 SR6,000 5% 10% 15% 20% Given these tax schedules, calculate the tax liabilities for: Taxpayer Tax Obligation Average Tax Rate . Gullivers' Goldsmiths Company, which earns an income of Gullivers' Goldsmiths Gunnar Marget Bjorn SR25,000,000 The following three individual taxpayers: (1) Gunnar, a baker earning SR12,000 per year; (2) Marget, a farmer earning SR35,000 per year; (3) Bjorn, a banker earning SR70,000 per year If you were the owner or manager of a Rodosian business, such as Gullivers' Goldsmiths, would you prefer the existing tax system or the progressive tax system? Why? O The progressive tax system, because the firm's tax obligation would be greater than that incurred under the existing system. This would reduce the profit available to the firm and its shareholders O The existing tax system, because my tax obligation would be less than that incurred under the progressive system. This would increase the amount of funds available to the firm's shareholders The existing tax system, because my tax obligation would be greater than that incurred under the progressive system. This would reduce the profit available to the firm and its shareholders Policy Proposal 2: Impose a special tax on individual taxpayers who purchase or own a cart and wagon that costs more than SR12,000. (The average cost of a Rodosian cart or wagon is SR6,000.) What effect will this tax have on Rodosian businesses? O This luxury tax effectively punishes individual consumers, as well as the manufacturers and sellers, of what King Valdimar or his advisors construe as excessively expensive carts and wagons. O This progressive tax is designed to encourage the purchase and use of carts and wagons costing more than SR12,000 This example of an income tax is designed to punish rich Rodosians for earning sufficient income to afford expensive carts and wagons