It has been recommended in Congress, on occasion, that the progressive income tax be converted into a proportional tax, with everyone paying the same tax rate. Is this a good proposal?
What will be an ideal response?
This would be a good proposal if a tax rate could be found that would bring in the same amount of revenue. To accomplish this, a large number of tax exemptions would probably have to be eliminated. A proportional tax would make the income tax law and structure easier to understand and administer. On the other hand, it would represent a repudiation of the ability-to-pay and equality-of-sacrifice principles on which the current income tax is based.
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Indicate whether the statement is true or false
Data on annual percentage changes in real GDP, consumption, and investment in the United States shows that fluctuations in investment _____
a. are noticeably smaller during expansions than during recessions b. are roughly similar to fluctuations in consumption c. are roughly similar to fluctuations in GDP d. are closely followed by economic forecasters because those fluctuations often signal that a recession will occur e. account for most of the variability in GDP