true or false, and please explain a) the Federal Income Tax System in the United

Question

true or false, and please explain

a) the Federal Income Tax System in the United States is progressive, in the sense that higher incomes pay a higher share of their income in taxes.

b) why are Federal Excise taxes and Social Security payroll taxes regressive?

c) why should the optimal linear tax rate always be below the maximizing revernue tax rate?

d) suppose the government wants to maximize tax revernue collected from top bracket earners. How should the top marginal tax rate be set?

e) The uncompensated labor supply elasticity of male workers is small because high wage rate male workers work about the same hours as low wage rate male workers.

f) Income effect on labor supply are small because a majority of lottery winners continue to work after they win the lottery.

g) the best way to structure the transfer system is provide benefits to those with no earnings but then phase-out these benefits quickly as earnings increase.

Explanation / Answer

a). True

  A progressive tax is a tax where the tax rate increases as the taxable base amount increases.

b). For social security to benefit the general population, the majority of people would need to get the amount they paid in plus reasonable interest. Failure to provide a reasonable rate of return hurts the working poor most. Therefore, it is regressive in nature.

Excise taxes are regressive taxes. Say a rich person and a poor person buy the same amount of cigarettes and pay the same cost (the excise tax does not change with income level). The tax assesed on the cigarettes represents a larger percentage of the poor person's income than the rich person's income, hence a regressive tax model.

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