Question
Suppose that the government needs to raise additional tax revenue. A politician suggests that the government place a tax on food because everyone must eat
Suppose that the government needs to raise additional tax revenue. A politician suggests that the government place a tax on food because everyone must eat and so a food tax would surely raise a great deal of tax revenue. Assume this new tax is in addition to any taxes that are currently on food, such as GST. However, since the poor spend a large proportion of their income on food, the politician argues that tax should be collected only from the sellers of food and not from the buyers of food. In other words, taxing the sellers of food would place the burden of the tax on the corporate sector and not on poor consumers. Can the government legislate that the burden of a food tax will only fall on the sellers of food? Why or why not? Explain your answer with the aid of a diagram.
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