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Tax credits reduce a taxpayer's tax liability and in some cases can create a refund. Discuss the following tax credits; earned income credit and energy credits. Why were these enacted? Are the credits refundable?

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Many states provide firms with an 'investment tax credit'€ that effectively reduces the price of capital. In theory, these credits are designed to stimulate new investment and thus create jobs. Critics have argued that if there are strong factor substitution effects, these subsidies could reduce employment in the state. Explain their argument. How does this affect the labor market?

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(1) Name four economic justifications for the collective's existence (i.e., the existence of government).

(2) The tax credits are for making high-efficiency appliances that are presumably good for the environment (i.e., that benefit the public in addition to the appliance consumer). Make an argument for why these subsidies are justified. Demonstrate and explain.

(3) The decisions concerning tax credits are made by elected officials. Why does the collective agreement make decisions in this manner? Explain.

(4) Are the decisions of the elected officials likely to be consistent with the collective desires? Why or why not? Explain.

(5) Why has Whirlpool Corp. contributed so much money to elected officials (i.e., what are they trying to accomplish)? Demonstrate and explain.

(6) Has the general public likely been aware of these tax credits? Why or why not? Explain.

1. 440,000 people are residing in Riverside. Among them, 80% of the population is the civilian labor force. 15% of the civilian labor force lost their jobs because their job skills are not required any longer. 30% of civilian workers are unemployed because the current wage is fixed at a very high rate. An a. Classify the civilian labor force in Riverside into one of the following unemployment types: structural, and frictional unemployment and explain why. (At least 200 words) b. Discuss at least two potential public policies that could reduce unemployment rates in Part A. (At least 200 words) c. Calculate how many of the civilian labor force (not percentage) in Riverside would fall into each type of unemployment. (Show mathematical steps in detail to receive full credits). d. Calculate the total number of employed workers in Riverside (Show mathematical steps in detail to receive full credits).

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