Public Economics: Taxation

The goal of this assignment is to construct a clear, well-argued essay that allows you to apply the tools in this class to a real world scenario. You must write a smooth, flowing essay with a thoughtfully composed thesis statement. A complete essay will include all of the following elements: an informative title, an excellent introduction and conclusion, and a body of the essay that provides thoughtful analysis of your thesis.
For this assignment, it is your task to propose your own tax reform and provide thoughtful anal- ysis of the merits and drawbacks of the reform and its effects. You proposal should be sufficiently narrow so as to allow you to complete the analysis in 4-5 pages. To complete this assignment, proceed as follows:
1.    Identify a specific component of the federal or state tax system that you wish to study. Do not study a tax that we have not discussed in class (e.g. the property tax) unless you come to my office and discuss it with me first. You should propose a specific, single reform for the tax system you are studying. Good examples of appropriate proposals would be to place a tax on bags in Eugene, or replace the current six personal income tax brackets with three tax brackets, or tax capital gains as ordinary wage income. A bad example is switching from an income tax to a consumption tax. Proposing your own reform is preferable, but if you borrow someone else’s reform, be sure to give the creator(s) of the reform appropriate acknowledgement in your paper.
2.    Once you settle on a particular reform, describe the current tax system as it relates to the component you wish to analyze. What is the current structure? Why might we justify this current structure?
3.    State concisely and succinctly the reform you are considering. What are the precise changes?
4.    Use economic models and material we have covered in class to analyze this reform. The arguments should be framed in terms of how the proposed reform will affect social welfare (the affect on tax revenue should be only a minor point). Three practical conduits through which tax policy can affect social welfare that we have discussed extensively in class are equity, efficiency, and complexity. Please explain how your proposal affects each of these. Analyze individuals’ behavior under current policy and under the proposed reform. How are behavioral responses different and why? Is the change in behavior desirable? Find any empirical evidence that suggests how individuals might respond to the tax system after making the reform. You may want to find empirical evidence that justifies your claims or that reinforces your theoretical analysis.
5.    Write an introduction and conclusion that sells this to the reader. Include an excellent thesis statement at the end of the introduction.
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The essay must be between 4-5 double-spaced pages (not including citations or graphs). You may find it difficult to constrain yourself to five pages, so you should be careful to select your words and examples.
Grading:
I will grade these essays in terms of (a) how well they demonstrate an understanding of the United States tax system, (b) the completeness they exhibit in the analysis of the proposed reform using tools from class, (c) the clarity with which the essays are written.?Some specific elements to pay attention to include the following points:
•    To evaluate (a), I will look at how well you discuss the piece of the tax system that you pick. Primarily looking at your response to part (2) above, you will be graded based on how clearly you explain this and how well you explain it in a manner consistent with the readings and lectures from this class.
•    To evaluate (b), I will pay special attention to your answer to parts (3) and (4). This is the most important part of the assignment, and should receive the most space in your paper. You should adequately cover various models and empirical evidence from class. You must state and apply the models to analyze the policy reform and possible individual responses. Simply stating a particular model from the book will not receive full credit. Rather, you must precisely state how the models apply and use them to analyze the policy. The same applies for the empirical evidence—be sure to explain exactly why it is relevant in this context. It is crucial that you present a balanced examination of your proposal. If you are arguing that a particular reform should be adopted, but there are some potentially negative effects that this reform may have (which is true of most reforms), these negative effects should be explicitly acknowledged and an explanation should be provided for why the benefits of this reform are expected to outweigh the costs.
•    To evaluate (c), I will pay special attention to the introduction and conclusion. However, good grammar and style must be present throughout the entire essay. You should be sure to spell check and grammar check your essay before turning it in. If you need help improving your writing, please visit the UO Writing Lab. They provide free drop-in help on your essays. ?A note on citations: ?All references, quotes, and facts must be appropriately attributed—your grade depends on it. For the purpose of this class, I request that you use parenthetical citations. To cite material or ideas from a book are article you would write (AuthorName YEAR, XXX) at the end of the sentence you are citing where XXX is the page or pages that you are citing, YEAR is the year of publication, and the AuthorName is the last name of the authors. If you are citing a general point/conclusion of the paper, pages of the paper do not need to be cited. If referencing a government document or form, you can replace the author’s name with the organization, such as the IRS. At the end of the paper, there must be a bibliography that includes the full citations of all documents referenced. You should pick a citation style and stick with it.
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Writing the essay:
•    Typewritten, double spaced, 12 point Times New Roman font, with 1 inch margins.
•    You name must be clearly typed in the upper right corner of your essay page. You should ?write an informative title at the top of your essay.
•    Your essay should follow all rules of grammar, spelling, and academic citations.
•    If you quote verbatim from sources, these quotations should be short, clearly-labeled and few in number. ?Academic Honesty
•    The essay must be uniquely your own work and satisfy all academic integrity standards or will merit a score of 0 and disciplinary action.
•    Plagiarism of any form will merit a score of 0 and disciplinary action. Borrowing a sentence (even with a few words substituted) from another source without appropriate citation is a form of plagarism.
•    You cannot work in groups while writing your essay. Submitting Your Essay
•    Late papers carry penalties of ten points subtracted (out of 100 possible points) per day late up to the final exam (March 17). After 3:15 pm on March 17, essays turned in will receive zero credit.
•    You must turn in a printed copy of your essay in class on March 12. If you are turning in the paper late, you must bring the paper copy to my office.
•    You must also turn in an electronic copy of your essay on Blackboard before class on March 12 for the paper to not be counted as late. To do this, go to the Blackboard home page for this course. Click the “Writing Assignment” tab in the green box on the left. You will submit your document as an attachment (it must be as a .doc or .docx file). A computer program will scan these documents to check that your essay is uniquely your own work.
•    To summarize, for your essay to be counted as on time you must give a paper copy to me in class on March 12 and you must submit an electronic copy of your essay online prior to the start of that class. Otherwise, your assignment will be marked as late. A late assignment will be counted as submitted once I have received both the electronic and paper copy.

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Public Economics Taxation

If the utility function is: Consumption Function:
U(c, `) = c ? ` 1-? . Y = (l + k) ah 1-a ,

Labor Supply:
Demand for a commodity x is D(q) with a decreases in q = p + t
Supply for commodity x is S(p) with an increases in p
Equilibrium is satisfied under the condition: Q = S(p) = D(p + t)
Begin from t = 0 and S(p) = D(p). So as to characterize dp/dt: the result of a tax increase on price, which regulates the load of tax:
Adjust dt to causes change in dp so that equilibrium holds:
S(p + dp) = D(p + dp + dt) ?
S(p) + S’(p)dp = D(p) + D’(p)(dp + dt) ?
S’(p)dp = D’(p)(dp + dt) ?
dp /dt = D’(p) /S’(p) – D’(p)

Therefore with the derivation above:

c ? ` 1-? = v(l + k) ah 1-a

Public Economics Taxation

If the utility function is: Consumption Function:
U(c, `) = c ? ` 1-? . Y = (l + k) ah 1-a ,

Labor Supply:
Demand for a commodity x is D(q) with a decreases in q = p + t
Supply for commodity x is S(p) with an increases in p
Equilibrium is satisfied under the condition: Q = S(p) = D(p + t)
Begin from t = 0 and S(p) = D(p). So as to characterize dp/dt: the result of a tax increase on price, which regulates the load of tax:
Adjust dt to causes change in dp so that equilibrium holds:
S(p + dp) = D(p + dp + dt) ?
S(p) + S’(p)dp = D(p) + D’(p)(dp + dt) ?
S’(p)dp = D’(p)(dp + dt) ?
dp /dt = D’(p) /S’(p) – D’(p)

Therefore with the derivation above:

c ? ` 1-? = v(l + k) ah 1-a