Friday, March 10, 2006

taxes

Agree or disagree, and why?

1. If the government taxes land, wealthy landowners will passt he tax on to their poorer renters.

2. A tax that has no deadweight loss cannot raise any revenue for the government.

3. If the government taxes apartment buildings, wealthy landlords will pass the tax on to their poorer renters.

4. A tax that raises no revenue for the government cannot have any deadweight loss.

3 comments:

amepham said...

4. i agree, because the DWL is the "space" between the tax revenue. If there is no revenue then the DWL would be nonexistant.
I could explain better with a picture i think.haha

Joe Madden said...

1 - i dissagree....the tax wil fall on the land owner instead of the people renting the land

KM said...

Think of the way that the tax bar works. The tax doesn't go just on producers or consumers unless there is perfectly inelastic/elastic supply or demand.

Taxes are shared regardless of who the original tax is put on - so for #1, landowners will pass at least PART of that tax on to their renters, but probably not all of it. So Joe - you are partially right. :)

#3 is the same - some will be passed on to the renters, but probably not all.

#2 & 4 -- if there is no deadweight loss, there is no tax - a tax is inefficient by nature, and it will create some dwl. so Alyssa, you are correct. :)