Tax cuts offer most for very rich, study says A study of Bush tax cuts that Cong

Question

Tax cuts offer most for very rich, study says A study of Bush tax cuts that Congress enacted in 2001 noted that while these tax cuts reduced rates for people at every income level, the top 1 percent of income earners will reap the biggest benefits. Source: The New York Times, January 8, 2007 If the assessment is correct, is such an outcome likely to be efficient? Is such an outcome fair on any of the standard principles of fairness? If it is true that the top 1 percent of income earners reap the biggest benefits from the Bush tax cuts, the outcome is likely to be OA. O B. because efficient, the tax cuts are fair efficient, taxes create a large deadweight loss when demand is elastic C. inefficient, the tax cuts are unfair O D. inefficient, it is always more efficient to tax the rich O E. inefficient, taxes create a small deadweight loss when demand is elastic The tax cuts can be considered fair by theprinciple if the richest 1 percent of Americans pay the greatest percentage of the taxes. OA. ability-to-pay O B. benefits

Explanation / Answer

Part 1) The tax cuts are efficient as they have reduced rates for people at every income level. This ensures that the tax cuts doesn’t distort market processes or individual behavior with regard to saving or work since rate have been reduced for people at every income level.

Part 2) However, such tax cuts are not fair on any of the standard principles of fairness. There are three standard principles of fairness.

Part 3) If it is true that the top 1 percent of income reap the biggest benefits from the Bush tax cuts, the outcome is likely to be efficient because taxes create a large deadweight loss when demand is elastic.

Part 4) The tax cuts can be considered fair by the ability to pay principle if the richest 1 percent of Americans pay the greatest percentage of taxes. This is because, they have the highest income so they can afford to pay the highest tax rate. In addition to this, since expenditure by richest 1 percent on necessary goods as percentage of their income is the lowest, they should pay the greatest percentage of taxes.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.