Policy Proposal 1: Replace the existing system with a progressive tax system that would tax business and individuals, using these schedules: Business Tax Rates If your Taxable Income Is Plus This Percentage on the Excess over the Base You Pay This Amount on the base of the Bracket SRO SR500,000 SR1,250,000 10% 15% 20% Up to SR5,000,000 SR5,000,000-SR10,000,000 SR10,000,000- SR20,000,000 SR20,000,000- SR40,000,000 SROver 40,000,000 Personal Tax Rates If your Taxable Income Is SR3,250,000 25% SR8,250,000 30% You Pay This Amount on the base of the Bracket Plus This Percentage on the Excess over the Base SRO 5% SR300 10% Up to SR6,000 SR6,000-SR24,000 SR24,000-SR50,000 SROver 50,000 15% SR2,100 SR6,000 20% Given these tax schedules, calculate the tax liabilities for: Gullivers' Goldsmiths Company, which earns an income of SR25,000,000 The following three individual taxpayers: (1) Gunnar, a beekeeper earning SR12,000 per year; (2) Marget, a cooper (barrel maker) earning SR35,000 per year; (3) Bjorn, a banker earning SR70,000 per year Note: Round your average tax rate answers to two decimal places. Tax Obligation Average Tax Rate SR % Taxpayer Gullivers' Goldsmiths Gunnar Marget Bjorn SR % SR % SR % Assume that Gunnar owes the same tax liability under both the current tax system and the proposed (progressive) system. As an economically rational taxpayer, why should he prefer the current system? Because under the current system the next sodor earned would be taxed at the rate of 1.2%; under the progressive system, it would not be subject to any tax. Because under the progressive tax system the next sodor earned would be taxed at the highest tax rate (20%); under the current system, it would be exempt from additional taxes. Because under the progressive tax system the next sodor earned would be taxed at the rate of 10%; under the current system, it would not be subject to any tax. 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? 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. This example of an income tax is designed to punish rich Rodosians for earning sufficient income to afford expensive carts and wagons. This progressive tax is designed to encourage the purchase and use of carts and wagons costing more than SR12,000 Policy Proposal 1: Replace the existing system with a progressive tax system that would tax business and individuals, using these schedules: Business Tax Rates If your Taxable Income Is Plus This Percentage on the Excess over the Base You Pay This Amount on the base of the Bracket SRO SR500,000 SR1,250,000 10% 15% 20% Up to SR5,000,000 SR5,000,000-SR10,000,000 SR10,000,000- SR20,000,000 SR20,000,000- SR40,000,000 SROver 40,000,000 Personal Tax Rates If your Taxable Income Is SR3,250,000 25% SR8,250,000 30% You Pay This Amount on the base of the Bracket Plus This Percentage on the Excess over the Base SRO 5% SR300 10% Up to SR6,000 SR6,000-SR24,000 SR24,000-SR50,000 SROver 50,000 15% SR2,100 SR6,000 20% Given these tax schedules, calculate the tax liabilities for: Gullivers' Goldsmiths Company, which earns an income of SR25,000,000 The following three individual taxpayers: (1) Gunnar, a beekeeper earning SR12,000 per year; (2) Marget, a cooper (barrel maker) earning SR35,000 per year; (3) Bjorn, a banker earning SR70,000 per year Note: Round your average tax rate answers to two decimal places. Tax Obligation Average Tax Rate SR % Taxpayer Gullivers' Goldsmiths Gunnar Marget Bjorn SR % SR % SR % Assume that Gunnar owes the same tax liability under both the current tax system and the proposed (progressive) system. As an economically rational taxpayer, why should he prefer the current system? Because under the current system the next sodor earned would be taxed at the rate of 1.2%; under the progressive system, it would not be subject to any tax. Because under the progressive tax system the next sodor earned would be taxed at the highest tax rate (20%); under the current system, it would be exempt from additional taxes. Because under the progressive tax system the next sodor earned would be taxed at the rate of 10%; under the current system, it would not be subject to any tax. 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? 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. This example of an income tax is designed to punish rich Rodosians for earning sufficient income to afford expensive carts and wagons. This progressive tax is designed to encourage the purchase and use of carts and wagons costing more than SR12,000
