Assignment Problem: Structuring Your Own Tax System
You are in charge of writing the tax law for a country that has five families. The country has a total taxable wage income this year of $250,000. In addition, households earned $25,000 in capital gains. The country's government needs to raise at least $50,000 for defense, schools, roads, and government salaries.
The following information is available for each of the five families:
Family 1: $10,000 income 3 children No investments/no capital gains
Family 2: $25,000 income 0 children No investments/no capital gains
Family 3: $45,000 income 0 children No investments/no capital gains
Family 4: $70,000 income 1 child $5,000 additional income from capital gains
Family 5: $100,000 income 0 children $20,000 additional income from capital gains
Discuss the details of the tax law that you choose to enact and its effect on each of the five families.
Format:
Part 1-a listing of your individual laws (no fancy law language needed; just a list describing exactly how you will tax your residents)
Part 2-a discussion about the reasoning behind why you chose your individual laws
Part 3-a calculation of how your laws affect each of the five families.