Explain the two reasons why the United States Social Security payroll tax is regressive. Could the payroll tax be made a progressive tax? Why or why not?
What will be an ideal response?
The payroll tax is regressive because the tax applies only to the first $87,000 of income. It is also regressive because it applies only wage and salary income and individuals in the upper end of the income distribution do not derive most of their income from wages and salaries. The payroll tax cannot be made progressive as long as higher-income individuals derive a larger proportion of their income from interest, rents, and profits than from wage and salary income.
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Sydney purchases a newly issued, two-year government bond with a principal amount of $10,000 and a coupon rate of 6% paid annually. One year before the bonds matures (and after receiving the coupon payment for the first year), Sydney sells the bond in the bond market. What price (rounded to the nearest dollar) will Sydney receive for his bond if newly issued one-year government bonds are paying a 5% coupon rate?
A. $10,600 B. $10,000 C. $9,906 D. $10,095
What would happen to measured GDP if more people started hiring workers to do household chores such as cooking and cleaning?
What will be an ideal response?
A more complex view of the incentives facing a bureaucrat _____
a. shows that bureaucrats might prefer to maximize their discretionary budget over their total budget b. shows that bureaucrats might prefer to always act in the public interest, if they believe in their bureau's mission. c. shows that the incentives facing a bureaucrat are simple and never conflict with one another. d. shows that the bureaucrats may about increasing their own income but their power and prestige
Jane wins $100,000 in a lottery and immediately uses her winnings to open up a donuts shop. Her direct cost is $50,000 . and she puts the remaining money in a savings account earning 10 percent annual interest. Alternatively, Jane could have placed all her lottery winnings in the 10 percent savings account. Jane's total cost of opening up a donuts shop is:
a. $60,000. b. $50,000. c. $160,000. d. $45,000. e. $55,000.