Provide an explanation of whether the following statements are true, false, or uncertain: a. “Tom’s workplace...

Provide an explanation of whether the following statements are true, false, or uncertain:

a. “Tom’s workplace provides free access to a fitness room; Jerry’s does not. Vertical equity requires that Tom be taxed on the value of having access to the fitness room.”

b. “Tom’s workplace provides free access to a fitness room; Jerry’s does not. If Haig-Simons income was used as the tax base, Tom would be taxed on the value of having access to the fitness room.”

Solutions

Expert Solution

Part 1) Standard Vertical equity in taxation means that those who have higher ability to pay taxes due to their higher income should pay more. The standard definition of vertical equity only takes into consideration the income earned by individuals.

So, the statement “Tom’s workplace provides free access to a fitness room; Jerry’s does not. Vertical equity requires that Tom be taxed on the value of having access to the fitness room.” Is False. This because, the concept of vertical equity does not take into consideration the access to fitness room as difference of income.

Part 2) The Haig-Simons definition of income is comprehensive, and it includes consumption and change in the net worth of the individual. In other words, it includes both the cash as income as well as income in kind in terms of services or benefits.

So, the statement “Tom’s workplace provides free access to a fitness room; Jerry’s does not. If Haig-Simons income was used as the tax base, Tom would be taxed on the value of having access to the fitness room.” Is True.

Rahul Sunny answered 1 year ago

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