# Questions tagged [taxation]

Refers to compulsory or coercive money collection by a levying authority, usually a government. The term "taxation" applies to all types of involuntary levies, from income to capital gains to estate taxes. Though taxation can be a noun or verb, it is usually referred to as an act; the resulting revenue is usually called "taxes."

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### Show that this income tax is effectively a lump sum tax

This is a standard income, leisure tradeoff model. $$\max_{c,l} \min\{c; l\}$$ $$s.t. \space c = w(1-t)(1-l)$$ $l$ is leisure (where total time is 1), $w$ is wage, $c$ is consumption, and $t$ is ...
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### How to calculate capital investment?

So i have this question: After spending 3 million on research, Better Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of 6 million. This ...
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### Can a progressive marginal taxation be regressive in terms of average tax rate?

Or does progressive marginal taxation imply that it is a progressive average taxation? Here, I mean that if $T(Y)$ is a tax function of income, marginal tax rate would be $dT/dY$ and average tax rate ...
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### How to calculate the after tax WACC

So i have this question: Assume the following data for U&P Company: Debt (D) = $100 million; Equity (E) =$300 million; rD = 6%; rE = 12%; and TC = 30%. Calculate the after-tax weighted average ...
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### Difference between corresponding and secondary tax adjustments in transfer pricing

What is the exact difference between a secondary tax adjustment and a corresponding tax adjustment? Are these two adjustment not the same? Does a secondary tax adjustment only happen with regard to ...
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### Does land value tax create an incentive to merge land ownerships?

LVT is "a tax on the unimproved value of land", and "in theory, it does not distort decision making". But if I own land then improvements such as buildings on my neighbour's land can easily increase ...
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### Why tax investment?

I assume that investing is more useful than consuming for society as a whole, at least in the long run. But then why isn't the government taxing consumption more and investment less? This would create ...
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### Would taxing money owned (as a share of purchasing power) be a better form of taxation?

Consider a nation whose money is entirely digital (like Bitcoin), but centralized (unlike Bitcoin). Furthermore, the total money supply is fixed, i.e. money cannot be created nor destroyed. To be ...
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### Economics of disparity in wages and in 'financial quality of life'

I am seeking a quantitavely and logically satisfying answer to the question I will outline below. It could be in a form of a book/article reference and ideally have as little ideological bias as ...
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### Is Universal Basic Income compatible with free international trade?

If one country introduces UBI, what prevents other countries from taking advantage of that and supplying cheaper (no need to finance a UBI scheme!) goods to the original country and outcompeting the ...
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### Does GST/VAT taxation reduce offshore corporate tax avoidance?

So large tech companies are known for having some side 'off shore' company in a 0% tax country (like, but not exclusively, The Bahamas), which charges royalties at approximately the same amount, as ...
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### Optimal Tax Rates on BGP

I was going through this paper by Aghion et al. I wanted some clarification on some of the computations. I understood the process uptil the normalization on page 22. Then we can get some policy rules ...
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### Can a government invest in public companies so their dividends can finance the government

Is it possible that a country could use the money in its sovereign wealth fund to invest in different country's Stock Market and use the dividends to finance its government thus increasing spending ...
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### Market price, output that maximize the price and level of firm profit after applying a license fee

I'm currently working on a problem that says the following : At first we had a number N of firms in perfectly competitive industry,the exercice gives us the total cost and the Market Demand with p as ...
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### What is the difference between VAT and corporate tax

Many times I hear that VAT (value added tax) is a "good" tax, while corporate tax is a "bad" tax/ However, both taxes take a cut from the difference between the income of a company and its expenses, ...
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### Why doesn't land value go to 0 when tax rate goes to 100%?

I'm looking at this equation here: $$y = \frac{ra}{r+x}$$ Where: $y$ = market value of land $r$ = real interest rate, set at 0.01 $a$ = land value, set at 1 $x$ = tax rate I don't really ...
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### Why do higher real interest rates increase land value?

I'm using this equation to calculate market value of land based on the levied land value tax: y = market land value x = land value tax r = real interest rate a = real time-independent land value i = ...
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### How much to earn to break-even throughout life [closed]

Firstly, my apologies if this isn't the right forum for this - I couldn't spot a better one! We are all born, pay taxes and die. Depending on where we live, those taxes will (hopefully) be used to ...
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### Can infrastructure costs be covered by taxes on flat sales/rents?

Instead of describing the general question, let me give a concrete example. Suppose in a city they want to extend a metro line but they don't have enough budget for it. Could the city designate a ...
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### Wasn't Laffer Wrong?

The Laffer curve merely describes the relationship between tax rate and tax revenue. It assumes that workers are most motivated to make money when the rate is 0%. It also assumes that as the rate ...
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### Why use marginal rather than average tax rates in incentive analysis?

Why do tax analysts worry about marginal tax rates, not average effective rates, in looking for incentive effects of taxes
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### Is there an intuitive explanation for the tax incidence formula from elasticity?

You're probably familiar with the formula for tax incidence (in a standard Principles framework) from elasticity. Specifically, that the consumer share is \frac{\varepsilon_S}{\varepsilon_S+|\...
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### Tax system is progressive or regressive

Let´s discuss a little! When the direct effect of a tax or transfer policy (compared to what would happen in the absence of the policy) is a reduction in inequality, it is called progressive policy. ...
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### What is the definition of distributionally neutral tax?

On the website https://www.core-econ.org/ in the book provided, there is an exercise 19.10. It asks whether poll tax is progressive, regressive or distributionally neutral. To answer this question of ...
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### How inflationary is progressive taxation?

Compared with, say minimum wage increases, how inflationary is progressive taxation?
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### How important is “second best optimum” for the modelling and formulation of policy advice?

The standard formulation of second best theory is: if there is introduced into a general equilibrium system a constraint which prevents the attainment of one of the Paretian conditions, the ...
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### Can a spending freeze solve the problem of the Italian enormous government debt?

In view of the upcoming Italian general election, I've been reading the program of a party (please let me know in the comments whether I can/should mention its name), and in a section of it they ...
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### Utility and consumption tax

If I have a model with taxes on consumption denoted $\tau$ should I write the utility function as $u(c)$ or $u((1-\tau)c)$? Thanks
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### Aggregating in a Continuum

I am working with the following Economic model of labour and consumption decisions: I have a population whose mass is normalized to one of consumers. They derive utility from consumption $c$,...
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### The United States' position on the Laffer Curve

According to a 2012 IGM panel (cf. reference below), most experts believe that a federal income tax cut would lead to a higher GDP in five years, ceteris paribus. Is this effect purely Keynesian, and ...
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### What at all justifies income taxes (as opposed to sales taxes only)?

For those who do not know, in America, the higher your income, the higher the percent of it is spent on taxes. This means that, whatever tax money is used for, those who are more hardworking (or, at ...
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### Quantity supplied & demanded equation with tax

Here's the simple question I can't get my head around :( QD= 120-P QS= 2P-10 Tax= 25 euro per unit How much does the government receive?
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### Are taxes supposed to be calculated depending on the seller, or the buyer?

We have a client that aims to ship his product internationally. (I think right now it mostly aims to be US and Canada, but the system would be open to people from all over the world to be bought) ...
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### If US capital income taxation were eliminated, which ordinary income tax brackets would be equally progressive?

This question only considers federal taxes in the United States. Also, by "capital income" I am including dividends, interest, capital gains, corporate incomes and estates. The Chamley-Judd result ...
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### Simultaneous consumption tax and subsidy

Suppose the government introduces a simultaneous tax and subsidy on a consumption good, which is produced under perfect competition. If the tax and the subsidy are equal, then there will be no ...
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### The relationship between gross profit and tax

I tried to do following question but I am not sure about my solution. Please tell me your opinions Since gross profit is strictly concave, I can say that $R’’(y)-C’’(y) <0$ Now I maximize the ...
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### Meaning of Transversality Conditions in Ramsey Problem

I'm working on a Ramsey problem for taxation, and am a little confused on the meaning/intuition behind the transversality conditions below: $\lim_{T \to \infty} \lambda_T b_{T+1} = 0$ \$\lim_{T \to ...
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### When people talk about “Companies Hiding Money Overseas” to avoid taxes, what does this really mean?

Presuming the consequence is holding cash somewhere else: I'm really interested in the objective effect of this from a global value creation perspective. I'm less interested in the money itself and ...