Which of the following statements is concerned with efficiency rather than equit
ID: 2439867 • Letter: W
Question
Which of the following statements is concerned with efficiency rather than equity?A) The best type of income tax is a flat tax because it treats everyone the same.
B) Our income tax system should be more progressive than it is now.
C) Taxes cause distortions in markets and reduce social welfare.
D) It is not fair to tax the income earned by the wealthy at higher rates than the poor.
E) Excise taxes on tobacco products affect low-income families the most and should be reduced.
Which of the following statements is concerned with efficiency rather than equity?
A) The best type of income tax is a flat tax because it treats everyone the same.
B) Our income tax system should be more progressive than it is now.
C) Taxes cause distortions in markets and reduce social welfare.
D) It is not fair to tax the income earned by the wealthy at higher rates than the poor.
E) Excise taxes on tobacco products affect low-income families the most and should be reduced.
A) The best type of income tax is a flat tax because it treats everyone the same.
B) Our income tax system should be more progressive than it is now.
C) Taxes cause distortions in markets and reduce social welfare.
D) It is not fair to tax the income earned by the wealthy at higher rates than the poor.
E) Excise taxes on tobacco products affect low-income families the most and should be reduced.
Explanation / Answer
Ans. The option (b) is concerned with efficiency rather than equity. The progressive tax system is efficient because the in this system, government imposes higher taxes on wealthy and rich people who earns more income, while places low taxes on people who earn less. The progressive tax system imposive tax based on their ability to pay the tax. Wealthy people can more taxes, and brings efficiency in the economy.
The other options are not correct because:
(A) is not correct because we cannot impose a flat tax on everyone irrespective of their income. Some earns more and are capable to pay more taxes while some ear less and woud not be able to pay high taxes.
(c) Yes, taxes causes distortions in the market, it reduces social welfare and causes deadweight loss in the society. Due to taxes, supply and demand changes.
(d) The taxes on tobacco products are imposed by the government with the aim to reduce the consumption of these products as there are harmful to health.
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