-Automatic Zoom Suppose that you are the advisor to the Mayor of a town that is
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-Automatic Zoom Suppose that you are the advisor to the Mayor of a town that is planning to build a civic center for its residents. The City Council has the funds for the initial planning and construction of the facility but it needs to raise money for the annual maintenance expenditures such as security, electricity landscaping, and custodial services. The Council is considering the following funding options: 1. have all the residents of the town pay a uniform fee per month to cover the annual maintenance costs 2. have all the residents pay a 10% income tax for the maintenance 3, have all the residents pay, but tax the rich at 15% and the poor at 5% 4. have only the users of the civie center pay a "TUsage fee" to the City Council 5. borrow money from the residents and cover the costs itself As the advisor to the Mayor, here is your assignment: 1. Identify at least one advantage and one disadvantage with cach of the above options. 2. Which would you recommend to the Mayur ar the bost optiont 3. How would you justify your recommendation?Explanation / Answer
1)
a) With a uniform fee, the advantage is that it is like a lump sum tax and have no have distortion associated with it. But a disadvantage is that everyone pays the same tax which is not equitable.
b) With a single income tax advantage is that it is simple and is fair but the disadvantage is that it penalizes the low income.
c) This has an advantage of boosting economic equality but the disadvantage is that it dis-incentivise the rich.
d) The advantage is that it is fair but again the disadvantage is that uniform fee on both rich and poor threatens income equality.
e) The advantage is that this would be a transparent procedure but disadvantage is that this imposes a cost on the government and will therefore lead to increase in public debt.
2) I would advice to the Mayor option 3 as the best option.
3) This is because this ensures equality, fairness and satisfies the ability to pay criteria which is important.
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