Question

Three neighbors share a private dirt road off the main highway that leads to their homes. The Huang and Smith families value the road at $900 each and the Hudson family values the road at $700. The cost to pave the road is $2,400. Would a proportional tax or headcount tax policy be passed?

a. Only the proportional tax would pass.
b. Yes, both would pass.
c. Neither would pass.
d. Only the headcount tax would pass.

Answer 1

In a proportional tax policy, each family would pay in proportion to how much they value the road. The total value is $900 (Huang) + $900 (Smith) + $700 (Hudson) = $2,500. So, each family's tax would be their value divided by the total value times the cost. For example, the Huang family would pay $900/$2,500 * $2,400 = $864. Each family would pay less than their value, so a proportional tax would pass.

In a headcount tax policy, each family would pay the same amount, which is the total cost divided by the number of families. So, each family would pay $2,400/3 = $800. This is more than the Hudson family values the road, so a headcount tax would not pass.

So, the answer is a. Only the proportional tax would pass.