The Rocky Mountain Wranglers are a professional football team in a large metropo

Question

The Rocky Mountain Wranglers are a professional football team in a large metropolitan city. They have competed on the gridiron in this city for the past 50 years. The people in this city and area of the country are very passionate and supportive of their team. Football is king in this city and it is entrenched in the culture. However, the team and the city are at a crossroads. Team ownership wants to build a new stadium. While the current stadium has served the team and fans well, it is showing many signs of age and deterioration, and it’s a dinosaur when compared to the majority of stadiums throughout the league. The owners want a state-of-the-art stadium with gigantic scoreboards, fine restaurants, shops, concessions, restrooms, pre- and post-game entertainment centers, luxury and corporate booths, etc. The owners want to enter into a partnership with the city to build the new stadium. The city would be a major player in this effort, and it would receive major revenues from various stadium activities. The city’s share of the costs would come from a 0.5% increase in the local sales tax. This tax increase will be placed on the November ballot for approval. How does this apply to vertical equity

Explanation / Answer

Answer:

Vertical equity is a method of collecting tax in which the taxes paid increased with the amount of earn income. However, vertical equity does not require that the percentage of income paid in taxes rise with increasing incomes. The main idea is very basic: if you earn more, you should pay more.

When The Rocky Mountain Wranglers and The city enter into the partnership to build the new stadium with gigantic scoreboards, fine restaurants, shops, concessions, restrooms, pre- and post-game entertainment centers, luxury and corporate booths, etc. They have to contribute the share of the project of the stadium.

However, one of the partner the city have receive major revenues from various stadium activities and his share of the costs would come from a 0.5% increase in the local sales tax. If project becomes ready and start to generate revenue from new stadium activities then city get share form that income and his income will be increase. So, he will be fall in higher tax bracket under vertical equity method.

The Rocky Mountain Wranglers income will be only form the share of this stadium, no other others income is specified. It means the rocky mountain wranglers income will be lower. So, he will be fall in lower tax bracket under vertical equity method.

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