5. a. Many citizens who believe that the rich should pay more in taxes argue tha

Question

5. a. Many citizens who believe that the rich should pay more in taxes argue that the taxes levied on corporations should increase. Is it likely that increased taxes on corporations will increase taxes paid by the rich? In your answer make sure you consider all possibilities for the incidence of the tax and make your assumptions explicit. b. Assuming that corporations maximize profits and investors maximize the return to their investment, explain how the corporate income tax will prevent efficiency from being attained.

Explanation / Answer

When economy is facing tough times, then the government needs to implement policies and plans which would help in bringing in more money in the economy. Increasing taxes for the rich will make makes sense, as they can afford to pay taxes relatively.

Increasing the taxes on teh corporates doesnt necessariy means that the rich will start paying more taxes. Increasing the corporate tax would mean that the cost of production for the firms would go up. This means that the prices of goods and services provided by the firms will go up creating an inefficient market for the people where everybody irrespective of their wealth situation, will be paying more money to compensate for the increase in the crporate tax by the govt on the companies.

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