Assume that instead of having a federal income tax, the federal taxes are levied as a consumption tax based upon a flat rate of 10 percent of all that you consume
How would this tax be different from an income tax? Would you expect this tax to be progressive, proportional, or regressive? What do you think would happen to the amount that people save under such a tax scheme? Explain your answers.
Saving would no longer be taxed as it is now. The tax would likely be more regressive than the current system because higher income households generally save more. Saving should increase because it is relatively subsidized by not being taxed.
You might also like to view...
How has air quality changed in the United States since 1980?
What will be an ideal response?
The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises
A) the demand curve shifts rightward. B) the demand curve shifts leftward. C) there is a movement down along the demand curve to a larger quantity demanded. D) there is a movement up along the demand curve to a smaller quantity demanded.