The Changes Contained in the Tax Reform Act (TRA)of 1986

question 58

Multiple Choice

The changes contained in the Tax Reform Act (TRA) of 1986 included

• A)Narrowing the tax base.
• B)Lowering marginal tax rates.
• C)A partial shift from corporate to personal taxes.

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Definitions:

Rival In Consumption

Describes a type of good where one person's consumption prevents or decreases another's ability to consume the same good.

Corrective Tax

A tax designed to induce private decision makers to take into account the social costs that arise from a negative externality.

Externality

A side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in market prices.

National Defense

Governmental and military actions and policies aimed at protecting a country from external aggression, threats, and maintaining national security.