Part II: Essay Questions
Instructions: Answer the following five questions as thoroughly and completely as you can. Your purpose is to demonstrate a high level of understanding to the instructor.
(35) Explain coherently the two following concepts of fiscal federalism: (a) The Principle of Correspondence; and, (b) The Principle of Subsidiarity.
(36) Briefly present two arguments for eliminating the federal tax on corporate income. Next, discuss two arguments for retaining the federal corporate income tax.
(37) Explain what is meant by the problem of “fiscal illusion,” and why some economists believe that placing all revenues into a general fund for spending purposes only worsens the problem.
(38) Increasing the collectability of a tax may compromise the equity of the tax system. Discuss this tradeoff and the reasons for it.
(39) List and explain some elements of a “good” retail sales tax.