Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. There are three categories of income tax filters in the United States: those who never evade taxes, those who occasionally do, and those who
2. There are three categories of income tax filters in the United States: those who never evade taxes, those who occasionally do, and those who always do. An examination of audited tax returns from one year to the next shows that of those who did not evade taxes last year, 95% will remain in the same category this year; 4% will move to the "sometimes" category, and the rest will move to the "always" category. For those who sometimes evade taxes, 6% will move to "never," 90% will stay the same, and 4% will move to "always." As far as "always" evaders are concerned, the respective percentages are 0.10 and 90% a) Express the problem as a Markov chain b) In the long run, what would be the percentages of the tax evasion categories of "never," "sometimes," and "always"? c) Statistics show that a taxpayer in the "sometimes" category of tax evasion represents an amount of $5,000 per return and in the "always" category, the amount is $12,000. Assuming the taxpayer population is 70 million and the average income tax rate is 12%, determine the annual reduction in taxes collected due to evasion
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started