A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other
What will be an ideal response?
The government should use dynamic tax analysis. When estimating the expected revenue generated by the sales tax, it is important to remember that the tax base could be influenced. If the tax base decreases sufficiently in response to a tax-rate increase, total revenues may be reduced even though there has been an increase in the sales tax rate.
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To maximize its profit, the firm in the figure above will produce ________ jeans and set a price ________ per pair of jeans
A) 150; between $50 and $25 B) 125; $25 C) 125; $50 D) 125; $75 E) None of the above answers are correct.
The welfare loss of a tariff equals that of an import quota that leads to the same level of imports
Indicate whether the statement is true or false