Public Sector Economics

In: Business and Management

Submitted By cuzntommy
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Public Sector Economics
Exercises
1. Florida Taxation
a. The 5.5% corporate flat tax levied in Florida is a PROPORTIONAL tax because it is based on gross income of corporations. This tax is levied at the identical 5.5% rate across all levels of gross income on corporations registered or doing business in Florida, so by definition, the tax is proportional.
b. Florida’s 6% sales tax is REGRESSIVE since all consumers, regardless of earnings are required to pay the same tax rate. There are arguments that consider the sales tax proportional because the same rate is evenly applied across low-, middle-, and high-income taxpayers. However application of the sales tax is regressive because the percentage of tax paid decreases with respect to total income as income levels increase. Lower-income tax payers pay the same dollar amount for particular goods as higher-income individuals, but at lower-income levels the tax represents a greater proportion of overall income and therefore the tax is actually, in application, regressive. Sales taxes on essentials like food, clothing, and housing also take up a larger percentage of lower-income individuals budget. The argument for proportionality of the tax is that higher-income individuals actually purchase more goods and more expensive goods. Because sales taxes in general do not take into account the economic or personal circumstances of the purchaser, and that the tax is not a personal income levy, both low- and highincome individuals will pay the same tax rate on the purchase of items. The sales tax is justifiably criticized for violating the vertical and horizontal equity premises of taxation.
c. The $0.04 per gallon tax on gasoline in Florida is highly REGRESSIVE. An individual with $1,000 of taxable income pays the same amount on the purchase of 10 gallons of fuel as an individual with $50,000 of taxable…...

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