Scenario 20-3 Suppose That a Society Is Made Up of Five Families

question 95

Multiple Choice

Scenario 20-3
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of liberalism prefer?

• A)Plan A
• B)Plan B
• C)either Plan A or Plan B
• D)neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy

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Definitions:

Responsibility

The obligation to carry out duties correctly and the accountability for the outcomes of those actions.

Logistical Arrangements

The planning and coordination of the detailed organization and implementation of a complex operation, often involving the movement of people or goods.

Ground Rules

Basic guidelines or agreed-upon principles that govern the conduct of an activity or process.

Decision Standards

The benchmarks or criteria used to evaluate the options in a decision-making process, which can include aspects such as cost, efficiency, ethical considerations, or impact on stakeholders.