You just won a contest and have been appointed State of CT Tax Commissioner (you

Question

You just won a contest and have been appointed State of CT Tax Commissioner (you might be asking, why did I enter such a contest? :)). Your primary goal is twofold: raise revenue and make the tax code more efficient. You have to decide which goods to tax, which goods to raise taxes on and which good to lower taxes. Consider your knowledge of elasticity, supply and demand. You need to close a $500 million budget gap for the State.

1. Which 3 goods would you eliminate taxes on and why? Explain your answer

Explanation / Answer

I will eliminate taxes on the goods like Instant energy efficient and less polluting equipments , electric car, education because there demand demand is very elastic as their price elasticity of demand is high , So due to taxes there emand decreases and also these goods have positive externality yo others

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