Author Question: Explain the difference between general grants and categorical grants. Under what circumstance will ... (Read 136 times)

stephzh · **on:** Jul 1, 2018

Explain the difference between general grants and categorical grants. Under what circumstance will they have the same impact? In that case, will one have an advantage over the other?

What will be an ideal response?

Question 2

List four types of tax-deferred saving vehicles. How could tax-deferred saving vehicles, if modified, transform the U.S. income tax into a consumption tax?

What will be an ideal response?

aruss1303 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

General grants come with no strings attached while categorical grants come with a specific spending purpose. A categorical grant will have the same impact as a general grant if the receiving government would have spent as much as the grant anyway. Given the higher record-keeping and monitoring costs for categorical grants, under the above condition the general grant is preferable.

Answer to Question 2

Four types of tax-deferred saving vehicles are IRAs, Roth IRAs, Keogh plans, and 401(k) plans. If no limits were placed on contributions into tax-deferred saving vehicles so that all savings and investment were sheltered from double taxation, then a broad-based federal income tax would approximate a consumption tax.