Question 1

If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is responsive

Accepted Answer

A wealth tax can reduce the incentive to save, leading to a decrease in annual savings below $10 billion, especially if the supply is responsive.

Question 2

A local property tax, such as that used in the United States, is likely to:

Accepted Answer

A local property tax can cause a flow of investment among jurisdictions because investors will seek to invest in jurisdictions with lower property taxes. It can also decrease the return to saving in all uses because the tax reduces the after-tax return on savings.

Question 3

If a property tax on real estate is capitalized,

Accepted Answer

The answer of If a property tax on real estate...

Question 4

Taxes on wealth are favored by those who want to increase the taxes paid by the rich. Is the incidence of a comprehensive wealth tax likely to be progressive Is the property tax, as used in the United States, a comprehensive wealth tax Evaluate the incidence and effects on efficiency of the property tax in the United States. Why do some critics of the tax argue that it is regressive Do you agree with their arguments

Accepted Answer

The answer of Taxes on wealth are favored by those...

Question 5

If the interest elasticity of supply of savings is zero, a comprehensive wealth tax will:

Accepted Answer

The answer of If the interest elasticity of supply of...

Question 6

From the point of view of the locality, increasing property taxes:

Accepted Answer

Increasing property taxes can lead to higher costs for businesses, which may increase the price of locally produced goods (A). It can also decrease the net income of landowners as they have to pay more taxes (B).

Question 7

The local property tax in the United States is levied primarily on:

Accepted Answer

Local property tax is levied primarily on real estate, which includes land and any attached buildings or other structures.

Question 8

Assuming that investors seek to maximize the return on their investment, the long-run effect of a national tax on real estate will be to:

Accepted Answer

The answer of Assuming that investors seek to maximize the...

Question 9

If a tax on real estate results in a decrease in the supply of housing, the tax will be:

Accepted Answer

A tax on real estate that decreases the supply of housing will be only partially capitalized. This means that the tax will be reflected in the market prices to some extent, affecting both property owners and renters, but not fully absorbed by either. The tax burden is shared between landlords (through potentially lower property values or returns) and renters (through potentially higher rents), rather than being fully borne by one side or completely passed through to property prices.

Question 10

A comprehensive wealth tax will:

Accepted Answer

The answer of A comprehensive wealth tax will:
...

Question 11

Which of the following would not be included in a comprehensive wealth tax base

Accepted Answer

Residential rents are a type of income and not a form of wealth. A comprehensive wealth tax base typically includes real estate, personal property, and intangible assets such as stocks, bonds, and cash savings.

Question 12

If the supply curve of savings is upward sloping, a comprehensive wealth tax will:

Accepted Answer

An upward sloping supply curve of savings indicates that as the interest rate increases, people are willing to save more. A comprehensive wealth tax reduces the net return on savings, causing people to save less, which shifts the supply curve of savings to the left. This results in an increase in the market rate of interest.

Question 13

Suppose that the current market rate of interest is 10 percent. The market rent on a parcel of land is $6,000 per year. A 10-percent land tax is imposed. As a result of the tax, the price of the land parcel:

Accepted Answer

The price of the land parcel falls from $60,000 to $30,000 because the market rent of $6,000 per year, when taxed at 10 percent, reduces the net income to $5,400 per year. At a 10 percent market rate of interest, the value of the land is the net income divided by the interest rate, which is $5,400 / 0.10 = $54,000. However, the initial calculation was incorrect in the explanation; the correct valuation before the tax, based on a $6,000 rent, should indeed be $60,000 ($6,000 / 0.10). The correct post-tax valuation should be directly calculated from the impact of the tax on the rent, not from a misstated calculation. The tax reduces the net rent, affecting the land's value, but the precise impact needs clarification in this explanation.

Question 14

If the supply of real estate is not perfectly inelastic, then the local real estate property tax differentials:

Accepted Answer

If the supply of real estate is not perfectly inelastic, landlords can shift the burden of property tax differentials to tenants by increasing rents.

Question 15

If the supply of saving is not perfectly inelastic in the nation, then which of the following taxes will cause efficiency loss in capital markets

Accepted Answer

A general wealth tax and a national tax on real estate will both cause efficiency loss in capital markets because they will discourage saving and investment.

Question 16

Intangible personal property includes:

Accepted Answer

Intangible personal property refers to non-physical assets such as stocks, bonds, and cash, which represent value but do not have a physical form.

Question 17

If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is perfectly inelastic

Accepted Answer

With perfectly inelastic supply, the quantity of savings does not change regardless of the tax, so annual savings remains $10 billion.

Question 18

If the supply of saving is not perfectly inelastic, then substituting a value-added tax for an equal-yield general wealth tax will:

Accepted Answer

The answer of If the supply of saving is not...

Question 19

Tax capitalization is:

Accepted Answer

The answer of Tax capitalization is:
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Quiz 17: Taxes on Wealth, Property and Estates