A Local Government Currently Has a Tax Base of $4

question 190

Multiple Choice

A local government currently has a tax base of $4 billion and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 billion. If the goal is to maximize tax revenues the tax rate should be

• A)lowered below 5 percent.
• B)kept at 5 percent.
• C)raised to 6 percent.
• D)abolished.

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Definitions:

Future Rentals

Expected or scheduled payments for the use of tangible assets (such as real estate or equipment) over the duration of a lease agreement.

Contingent Rentals

Contingent Rentals are lease payments that are not fixed or established in advance but depend on a future event or condition, like a percentage of sales.

Rental Income

The income received from leasing out property or other assets.

Depreciation Expense

Depreciation Expense represents the allocation of the cost of tangible assets over their useful lives recognizing a decrease in value due to wear and tear, deterioration, or obsolescence.