Question
(a) Explain how the behavioural effects, financial effects and organisational effects of tax policies can affect economic efficiency. (b) Consider a country debating how to
(a) Explain how the behavioural effects, financial effects and organisational effects of tax policies can affect economic efficiency. (b) Consider a country debating how to finance road and bridge improvements. Among the possibilities: increased fees on drivers' licenses; a personal property tax on motor vehicles; a tax on automobile parts (including tires); increased taxes on car fuel; more tolls on motorways; higher taxes on cigarettes and liquor. Which of these taxes are benefit taxes, which are corrective taxes, which are both? Which of these taxes is least distortionary? (c) Using a demand-supply diagram, explain the welfare implications of a housing subsidy programme.
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