a. (1) adequacy (2) broad basing (3) compatibility (4) convenience
b. it can be calculated by determining the losses imposed on taxpayers as a consequence of the tax. that is to say, the burden of an excise or income tax can be measured as the reduction of consumer surplus and profits induced by the tax.
c. a <u>proportional tax</u> impacts low, middle and high income earners relatively equally. they all pay the same amount regardless of the income. for example, sales tax. social security can also be considered a proportional tax as well given that everyone pays the same rate, at least up to wage base.
<u>regressive taxes</u> have a greater impact on low income individuals rather than high income earners. low income individuals tend to pay a higher amount because the government assessed tax as a percentage of the value of the asset that the taxpayer purchases or owns. for example, real estate property taxes and excise taxes on consumables. many also consider social security to be a regressive tax as well.
a <u>progressive tax</u> has more of a financial impact on higher income individuals rather than low income earners. this tax is based on the taxable amount of an individuals income. tax rate increases as an individuals wealth increases. for example, the current u.s. federal income tax is a progressive tax system. each dollar the individual earns places him/her into a bracket, resulting in a higher tax rate once the dollar amount hits a new threshold.
d. this is a progressive tax. the tax increases as income increases.
the first $50,000 goes to $500 tax
the next $50,000 goes to $1,000 tax
you then have $25,000 left over (since you’re calculating based off of $125,000 in assets) which goes to $750
the total tax is everything added together
500+1000+750= $2,250
