Taxation Policy and Structure



Taxation           Policy   and             Structure

ECON   353       –            OP01

Spring  2021     Assignment      #1             Due:     Monday,           May             17,        2021




There   are        5           questions             in          the       assignment             with     a           total     of             30         marks  available.             The       assignment      must             be         submitted        by             11:59pm           MDT     on             the       due       date     to             avoid    a           penalty.             Submit by         email                 with     the       subject             “Assignment    1             <Student          Name,  Student             ID>”.


  • Refer to          table    1       from     the       textbook       (below).            Based   on       this       data,    can       we       make    any       conclusions       about   changes            in       the       size       of       government     between       1991     and       2014?  Has       the       size       of       government     grown,       contracted       or       remained         the       same       over     that      period?                    [6          marks]



Sources: Statistics Canada. CANSIM data from the following series v52531007, v62471023, v466668, v62471340 series.



  • Higher payroll taxes    may       be         required           to       finance the       Canada       Pension             Plan      as       the       population           If       employers        are        asked       to          pay       all         of       any       such     increase,       rather  than     sharing the       increase            equally between       employers        and       employees,      how      would       this       affect   wages  and       employment?  Would       businesses       likely    end       up         paying  for        the       increase            in          CPP       premiums?      [3          marks]


  • A monopolist      produces       commodity                Suppose       that      an         ad         valorem       tax        is           levied   on       Z.          What    are        the       effects of          the       tax       on         the       quantity       demanded,      the       price       paid      by         consumers,       the       price    paid      by       the       monopolist,     and       monopoly         profits?       Who     bears   the       tax       burden?            State    your       assumptions    and       use       a       graph   to          illustrate       your     conclusions.     [5       marks]



  • Suppose that      provincial       income              tax        is       computed        as          a       flat        rate      of          10       percent,            however       no         tax        is           levied       above  $70,000            in       taxable             Taxable       income,            in          turn,     is       computed        as          the       individual’s       income       minus  $18,000;           that       is,          everyone          receives       a           $18,000       deduction.       What    are       the       marginal           and       average             tax        rates       for        each     of          the       following          workers?       (Evaluate          the       marginal       tax        rate      at          each       person’s           current       income              level.)   [6       marks]
    1. A part-time          worker       in          the       fast-food            industry       with     annual income       of          $12,000.
    2. A office   manager       with     annual income       of          $72,000.
    3. A Chief    Financial       Officer of          with       annual income       of          $200,000.

Is           the       tax progressive,     proportional, or          regressive        with respect             to          income?


  • Which of          the       following          is           likely       to          impose a           large       excess  burden (deadweight       loss)?   Why     or          why       not?     Use       graphs to       illustrate           your            (Be       sure      to          clearly       state    your     assumptions.)


  1. A tax        on
  2. A tax        on
  3. A tax        on         orange
  4. A subsidy             on       theatre
  5. A tax        on