Question

the governor of the state of mobby has asked you to give him advice on a proposed expansion of the state sales tax base to include all services and goods，currently the state only taxes goods. what are the pros and cons of this expansion，explain it

Answer 1

Pros-

• Bring equality for the businesses in good and in services when both are taxed accordingly
• Non Evadable - Since sales tax are charges to end consumer the taxes are not Evadable
• Easy collection- Also since end consumer only will be paying it collection becomes lot more simpler
• When charged on services essentially the tax base rises and contributes to the national income
• Helps in reducing predatory prices by services company which is detrimental for the health of whole industry
• Consumer have the direct choice available to whether use that service or not
• Bricks and mortar will have the same level playing field as that of internet based ecommerce

Cons-

• Higher burden on consumers
• Detrimental for overall health of industries
• Consumer surplus will come down
• Private saving will be impacted
• Uniformity of tax rate remains the question
• Regressive in nature since this will increase tax burden on poor people
• Hurt the growth of free market