Why does the double taxation of saving occur? Provide a numerical example of the double taxation of saving under a traditional income tax
What will be an ideal response?
The double taxation of saving occurs because under our current tax system saving is made out of income that has already been taxed and then savings is taxed again. For example, assume a 10 percent tax rate on income and saving. An individual earning $1,000 would take home $900 in after-tax income. If the individual saves $100 any income on that saving during the year will be taxed at 10 percent. Assuming a 5 percent return on saving that would mean an additional tax of 50 cents in the first year alone.
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What is meant by a speculative bubble?
a. A pattern in past stock prices that, according to technical analysts, indicates higher future prices. b. A circumstance where everyone expects higher prices, which in turn causes higher prices. c. An occasional occurrence in program trading in which many investors simultaneously receive instructions to sell. d. A situation where poorly informed traders exacerbate any upturns or downturns in the market.
According to the law of demand, ceteris paribus,
A. The responsiveness of consumer demand to a change in the price of a good is measured by the price elasticity of demand. B. A consumer will purchase more of a good at higher prices than at lower prices. C. The quantity demanded increases at lower prices. D. Price and quantity supplied are directly related.
Usually, price elasticities of supply are
A. considered short-run adjustments due to supply constraints. B. positive, because higher prices yield larger quantities supplied. C. an inverse relationship between price and quantity supplied. D. ordinarily a negative number based on the law of supply.
Stan owns a software design business. He obtained a bank loan to buy computer equipment for his business. He pays $1,000 per month for interest on the loan. He has 10 employees, each of whom is paid $4,000 per month. Because his business has been
successful, next month he will increase employee wages to $5,000. If the revenue from his business remains at its current level, Stan is considering an addition to his office. Which of the following statements regarding Stan's business is false? A) The payments Stan makes to his employees are variable costs and explicit costs. B) The monthly payment Stan makes for his bank loan is an implicit cost. C) The monthly payment Stan makes for his bank loan is a fixed cost. D) The addition Stan is considering to make to his office would be an implicit cost.