Suppose that you are the chairman of the Library Board of Governors in Bookville. Your library system has been authorized by the voters to collect a property tax in order to pay for the services provided. The current value of property in Bookville is $100 million. The Library Board has authorized a tax rate of one-half of one percent. The Village Charter specifies that the tax base is the market value of property in the Village, and it permits the Library Board to select any tax rate it wishes.
a. How much revenue does the Library Board collect?
b. If you were to raise the tax rate to three-quarters of one percent, by how much would revenues rise (assuming no change in the tax base)?
c. If a disgruntled group of homeowners were to succeed in changing the village charter, so that assessed values for tax purposes are just one-half of market value, what change in the tax rate would generate the same revenue as we had originally in part a?