Suppose you hear a politician say the following: "We should tax the businesses and corporations-not the...

Suppose you hear a politician say the following: "We should tax the businesses and corporations-not the people!" How would an economist respond to this type of statement? (5-7 sentences) (6pts)

Expert Solution

From the point of view of an economist taxing only corporations and businesses will be a wrong move on the part of the government. First of all with the abolition of taxes like income tax on individuals, government will loss a significant portion of its revenue and won't be able to meet the public expenditure requirements of the economy since cost of running a nation is very high.Funds provided by the government to education health and welfare schemes will fall . Inequalities in the income distribution will rise as a result of rich people getting exempted from paying taxes. On the other hand, abolition of taxes on individuals will prompt the government to impose a high tax burden on corporations and businesses.This will adversely affect the incentive of firms to produce and invest. What we need is a more ideal tax system which satisfies all the canons or principles of taxation and enables the growth of the economy along with a fair distribution of income.

Rahul Sunny answered 2 years ago

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