Question

Answer the following questions about tax base.

a. Explain what Haig-Simon comprehensive income definition is; how it is applied to defining a tax base; and explain why we deviate from such definition in case of property and casualty losses, medical expenditures, and state and local taxes.

b. Explain what tax deductions and tax credits are by using examples of charitable donations and Earned Income Tax Credit (EITC), respectively; and explain their implications in terms of equity.