Question

In: Economics

Compare and contrast the following and offering your opinion on which one of each pair of...

Compare and contrast the following and offering your opinion on which one of each pair of tax strategies is the most appropriate. a. The “ability to pay” or the “benefits received” taxation principles b. “Progressive” taxes or “regressive” taxes

Solutions

Expert Solution

a) The benefit received principle sees the relationship between the government and the consumers as being in an exchange relationship. The government provides goods and services while the people pay in accordance to the benefits received by them. This principle ignores the concept of equity in distribution and its form changes with the changes in the expenditure structure of the economy. Hence it is a tax expenditure policy. It is also difficult to calculate the benefit received as people may not show their true preferences.

Ability to pay principle focuses on the aspect of equity in distribution. It requires the individuals to pay according to their ability to pay. The abilitycan be calculated on the basis of income, consumption or wealth. It can be horizontal equity where people with same income may pay same prices, or it could be vertical equity where people with different income levels pay different taxes. This is a better taxation principal than the benefit received theory.

b) Progressive taxation is a tax in which the tax rate increases as the taxable amount increases. In regressive taxation the tax rate decreases as the taxable income increases. Progressive taxation is considered superior to regressive taxation as it leads to less burden on the poor.


Related Solutions

Compare and contrast prejudice and discrimination, offering one to two similarities (comparisons) and one to two...
Compare and contrast prejudice and discrimination, offering one to two similarities (comparisons) and one to two differences (contrasts). Robert Merton's diagram about prejudice and discrimination contains four cells: active bigot, timid bigot, fair-weather liberal, all-weather liberal. For each cell, define and give an example of a person who fits the category. In your view, which type is the most dangerous for society, and why?
Which one of each of the following pair of nuclides would you expect to have the...
Which one of each of the following pair of nuclides would you expect to have the longest half-life? Sr-101 or Sr-95 Co-48 or Co-53
Use a pair of similar examples to compare and contrast DRA and DRI.
Use a pair of similar examples to compare and contrast DRA and DRI.
Compare and contrast Gartner's Hype Cycle with the technology S-Curve, explain, from your own opinion: -...
Compare and contrast Gartner's Hype Cycle with the technology S-Curve, explain, from your own opinion: - Which one is better or more suitable for your use? Why?
Compare and contrast Gartner's Hype Cycle with the technology S-Curve, explain, from your own opinion: -...
Compare and contrast Gartner's Hype Cycle with the technology S-Curve, explain, from your own opinion: - What are their similarities? - How do they differ? - Which one is better or more suitable for your use? Why?
Compare and contrast opinion leaders, receivers, and seekers. Describe how each group might use social media...
Compare and contrast opinion leaders, receivers, and seekers. Describe how each group might use social media (e.g., Facebook, Twitter, Instagram, and blogs) differently. How can marketers utilize an understanding of these classifications of consumers and the ways they use social media? Provide examples.
Define and compare financial flexibility to liquidity and solvency and in your opinion identify which of...
Define and compare financial flexibility to liquidity and solvency and in your opinion identify which of the three is most important to creditors. and why?
Compare and contrast two types of leases and describe the advantages and disadvantages of each. Which...
Compare and contrast two types of leases and describe the advantages and disadvantages of each. Which type of lease would produce the lowest risk?
Compare and contrast two types of leases and describe the advantages and disadvantages of each. Which...
Compare and contrast two types of leases and describe the advantages and disadvantages of each. Which type of lease would produce the lowest risk?
Construct a table to compare and contrast two features of each of the following: the anatomies,...
Construct a table to compare and contrast two features of each of the following: the anatomies, and the Motility, Secretive, Digestive, and Absorptive functions of the stomach, small intestine, and large intestine.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT