Problems & Exercises for MACRO

UNIT TWO (FOR EXAM TWO)

Unit Two--Assignment One--Web Problem 4

Assume your annual vehicle registration or tag fee is 1% times the factory delivered price (FDP). Would this tag fee system be a progressive, regressive, or proportional tax? In answering this question, do not consider excise taxes. You may want to review the mini-tables presented on the website and then make up a new one of your own. The first income might be $30,000 and the second income $60,000. Decide how much a household with a $30,000 annual income would spend on a vehicle. Then estimate how much a household with a $60,000 income would pay. Now do the arithmetic as shown on the website and classify the tax as progressive, regressive, or proportional. Please send your response by e-mail. (Hint: most taxes are not proportional.)