8. Our Haig-Simons idea of income is in the background of the design of today\'s
ID: 2409612 • Letter: 8
Question
8. Our Haig-Simons idea of income is in the background of the design of today's tax code. However, we are not always able to adhere to its pure definition for various a. Explain how the treatment of "charitable giving" in the Federal Income Tax reasons. code satisfies or does not satisfy our Haig-Simons definition. (4 points) Explain how the treatment of "education expenses" in the Federal Income Tax code satisfies or does not satisfy our Haig-Simons definition. (4 points) b. Explain how the treatment of "capital gains" in the Federal Income Tax code satisfies or does not satisfy our Haig-Simons definition. (4 points) c. d. Explain how the treatment of "mortgage interest" in the Federal Income Tax code satisfies or does not satisfy our Haig-Simons definition. (4 points)Explanation / Answer
Answer:
A) Treatment of 'Charitable Giving' in the federal income tax code satifies or do not satisfy our HAIG-SIMONS Definition.
The answer is Charitable Giving do no satisfy and deviates from HS Income definition
Explanation:-
One of the reason for Deviations is due to EXTERNALITY/PUBLIC GOODS RATIONALES
Charitable giving
Suppose you are deciding whether to buy a $1 cup coffee or to donate to homeless shelter. If spent on coffee must earn $1/(1-tax), so that have $1 after tax income. If $1 is spent on the shelter, she must earn $1. So relative price of the shelter is $1/ [$1(1-tax)] or $(1-tax)
Reducing taxes on some activities will give external benefits to society.
Charitable giving The purpose of charity is to increase the provision of public goods.
An example of a public good is lack of homelessness. By providing shelters for the homeless, the amount of this public good can be increased. A way to increase this provision is to make charitable giving tax-deductible. You can deduct expenses for charity from your taxable income.
This makes charitable giving cheap relative to other forms of consumption. It is a way of subsidizing giving to charity.
However a tax code that includes deductions for charitable giving deviates from the Haig-Simons definition of income: A person’s ability to pay taxes, according to Haig-Simons would include what they spent on charitable donations, as they presumably get some benefit from doing so.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.