PBAD 3431: Public Sector Budgeting Assignment 1 Consider the following tax information for a mid-sized American state: Additional information is as follows: The personal income tax is levied at progressive rates beginning at 1% on taxable income in excess of $10,000 and increasing to a maximum of 6% on taxable income in excess of $100,000. State taxable income is based on federal taxable income with some minor adjustments. The tax is levied only on income earned within the state. Corporate income taxes are levied at a flat rate of 5% on all taxable income. As with the personal income tax, state taxable income is based on federal taxable income with some minor adjustments. Also as in the personal income tax, the corporate tax is levied only on income earned within the state. Sales taxes are levied at a statewide rate of 7%. Food and prescription drugs are exempt from the tax. Property taxes are primarily collected at the local level. The state incurs expenses related to making sure the various localities within the state assess property consistently and collects a relatively small amount of tax on state-owned lands used by private business. Tobacco taxes are levied primarily as a disincentive for people to smoke. Motor fuel taxes are deposited into a separate fund and are used solely for highway maintenance and road construction. You learned in this module about various criteria used to evaluate taxes. Based on the above information, use these principles of a good tax system to answer the following questions: 1. From an adequacy of revenue standpoint, which taxes appear to produce large amounts of revenue at reasonable rates? ( 1 point) 2. Which tax is an example of the general equity standard of taxing according to benefits received, and why? ( 1 point) 3. Which taxes are progressive? (1 point) Explain why. ( 1 point) 4. Which taxes are regressive? ( 1 point) Explain why. ( 1 point) 5. Why are food and prescription drugs exempted from the sales tax? What principle is at play here? ( 1 point) 6. From a cost of administration standpoint, which two taxes are evaluated most positively? What do you think makes the administrative cost of these taxes so much lower? (1 point) Why do you think the property tax is so costly for the state? ( 1 point) 7. Which tax is clearly discriminatory, but is designed to be so? Why? ( 1 point) PBAD 3431: Public Sector Budgeting Assignment 1 Consider the following tax information for a mid-sized American state: Additional information is as follows: The personal income tax is levied at progressive rates beginning at 1% on taxable income in excess of $10,000 and increasing to a maximum of 6% on taxable income in excess of $100,000. State taxable income is based on federal taxable income with some minor adjustments. The tax is levied only on income earned within the state. Corporate income taxes are levied at a flat rate of 5% on all taxable income. As with the personal income tax, state taxable income is based on federal taxable income with some minor adjustments. Also as in the personal income tax, the corporate tax is levied only on income earned within the state. Sales taxes are levied at a statewide rate of 7%. Food and prescription drugs are exempt from the tax. Property taxes are primarily collected at the local level. The state incurs expenses related to making sure the various localities within the state assess property consistently and collects a relatively small amount of tax on state-owned lands used by private business. Tobacco taxes are levied primarily as a disincentive for people to smoke. Motor fuel taxes are deposited into a separate fund and are used solely for highway maintenance and road construction. You learned in this module about various criteria used to evaluate taxes. Based on the above information, use these principles of a good tax system to answer the following questions: 1. From an adequacy of revenue standpoint, which taxes appear to produce large amounts of revenue at reasonable rates? ( 1 point) 2. Which tax is an example of the general equity standard of taxing according to benefits received, and why? ( 1 point) 3. Which taxes are progressive? (1 point) Explain why. ( 1 point) 4. Which taxes are regressive? ( 1 point) Explain why. ( 1 point) 5. Why are food and prescription drugs exempted from the sales tax? What principle is at play here? ( 1 point) 6. From a cost of administration standpoint, which two taxes are evaluated most positively? What do you think makes the administrative cost of these taxes so much lower? (1 point) Why do you think the property tax is so costly for the state? ( 1 point) 7. Which tax is clearly discriminatory, but is designed to be so? Why? ( 1 point)