The govt of bigtown is concerned about its revenues. It hasincreased it tax rate from 2.2% to 2.8% fr companies with netbusiness income exceeding $2M while at the same time reducing therate from 2.2% to 1.9% for companies with net business incomebetween $1M and $2M. Companies with less than $1M net businessincome are not taxed. Requirements: For each of the following 4situations: a, determine total projected govt revenues before andafter the tax increase. b, explain in couple of sentences whetherand why you consider this good or bad tax policy. Situation 1: Thetotal amount of net taxable business income for companies withincome exceeding $2M remains static at $50M and net taxable incomefor companies with income between $1M and $2M remains static at$100M for the entire town. Situation 2: total amount for the nettaxable business income decreases from $ 50M to $48Mfor companieswith income exceeding $2M due to business moving to a differentjurisdiction. The net taxable income for companies with incomebetween $1M and $2M remains static at $100M. Situation 3: the totalamount of net taxable income for businesses with income exceeding$2Mdecreases from $50M to $45M ue to bsiness moving to differentjurisdiction. However, total taxable income for companies withincome between $1M and $2M increased from $100M to $110M. Situation4: total amount of net taxable business income for businesses withincome exceeding $2M decreases from $50M to $47M due to businessmoving in different jurisdiction. However, total taxable income forcompanies with income between $1M to $2M increased from $100M to$120M.
The govt of bigtown is concerned about its revenues. It hasincreased it tax rate from 2.2% to 2.8% fr companies with netbusiness income exceeding $2M while at the same time reducing therate from 2.2% to 1.9% for companies with net business incomebetween $1M and $2M. Companies with less than $1M net businessincome are not taxed. Requirements: For each of the following 4situations: a, determine total projected govt revenues before andafter the tax increase. b, explain in couple of sentences whetherand why you consider this good or bad tax policy. Situation 1: Thetotal amount of net taxable business income for companies withincome exceeding $2M remains static at $50M and net taxable incomefor companies with income between $1M and $2M remains static at$100M for the entire town. Situation 2: total amount for the nettaxable business income decreases from $ 50M to $48Mfor companieswith income exceeding $2M due to business moving to a differentjurisdiction. The net taxable income for companies with incomebetween $1M and $2M remains static at $100M. Situation 3: the totalamount of net taxable income for businesses with income exceeding$2Mdecreases from $50M to $45M ue to bsiness moving to differentjurisdiction. However, total taxable income for companies withincome between $1M and $2M increased from $100M to $110M. Situation4: total amount of net taxable business income for businesses withincome exceeding $2M decreases from $50M to $47M due to businessmoving in different jurisdiction. However, total taxable income forcompanies with income between $1M to $2M increased from $100M to$120M.
