Question

In order to raise revenue, the federal government planned a tax amnesty program that allows tax delinquents to pay all owed tax without added financial penalty. However, economists projected that the federal government would collect a far lower percentage of total tax owed by delinquents than did state governments implementing similar programs.Which of the following, if true, would most contribute to an explanation of the economists’ projections?(A) Tax amnesty programs are only successful if they are widely publicized.(B) Most people who honestly pay their state tax are equally honest in paying their federal tax.(C) Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.(D) The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.(E) Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.

Answer 1

Answer:

(D) The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.

Explanation:

Assuming that the program is similar in states and the federation, the explanation for the Federal Government to have a higher collection than the states is in the form of taxation.

The American Constitution gives states autonomy to decide on tax matters in their territories. However, federally imposed taxes are imposed on all states of the Federation. Thus, a national tax collection program will have a similar impact on all states, while state programs will vary according to the form of taxation imposed by each state. Since each state charges the tax differently, the program may not have the same response at the state level.