Chapter 1 Taxes and Taxing Jurisdictions

Questions and Problems for Discussion

1. Tax payments differ from government fines and penalties because they are not intended to deter or punish unacceptable behavior. Tax payments differ from fees or user charges because they do not entitle the payer to a specific government good or service, such as a postage stamp or a driver’s license. Tax payments also differ from fees or user charges because they are compulsory.

2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory payment is not specifically punitive but does apply selectively to those companies most likely responsible for the polluted condition of Green River. However, these same companies may be the entities that benefit most from the environmental clean-up.

3. This payment more closely resembles a fee for a government service than a transaction-based tax because the transaction occurs between a private party and the jurisdiction itself, rather than between private parties engaging in a market transaction. The payment also entitles the payer to a specific benefit (the right to marry under law).

4. To the extent that the decline in exterior maintenance reduces the value of Mr. P’s apartment complex, he bears the incidence of the increased property tax. To the extent that the decline reduces the value of adjoining properties or makes the neighborhood less attractive, the owners of the adjoining properties and the neighborhood residents share the incidence of the tax increase.

5. People who don’t directly use public schools (such as Mr. and Mrs. K or people who do not have children) indirectly benefit from a public education system for the general population. Arguably, public education contributes to a skilled workforce and improves the cultural and social environment in which Mr. and Mrs. K live. Based on this