(3) Financing government services through user fees generally leads to a debate/comparison of fees v. taxes....

(3) Financing government services through user fees generally leads to a debate/comparison of fees v. taxes. Please describe and define a fee and a tax, identifying the significant differences between the two. Your answer should provide examples of each to support your analysis.

(4) "Sales taxes are fairer than income taxes because sales taxes cannot be avoided by the rich." Discuss & evaluate this idea, using tax policy concepts to provide support for your evaluation. Is it possible to design a sales tax that is more progressive than a personal income tax?

Expert Solution

Ans - 3) There is a significant difference between the government imposed tax and fees charged by the government. Tax is an imposition made for the public purpose, without reference to any services rendered by the State or any specific benefit to be conferred upon the tax payer. The main purpose behind imposing of tax is to raise the general revenue. On the other hand, a fee is a payment levied by the State in respect of services performed by it for the benefit of the individual. The money of charged fees is set apart and not merged with general revenue of state. A tax is levied as a part of common burden while A fee is for payment of specific benefit. For example, the income tax, sales tax, etc an individual pay to government do not provide any direct benefit to individual, infact the money used in overall development of economy. On the other hand, the example of fees charged by government can be the road toll that an individual pay for running their vehicles on road. Fee could be the amount the individual need to enter the government owned facilities such as historical monuments and museums.

Rahul Sunny answered 1 hour ago

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