Final answer:
The question deals with the economic implications of tax savings versus income generation, focusing on implications like the effect of low capital gains taxes on investment and how tax systems are designed to balance revenue generation with minimizing economic distortion.
Step-by-step explanation:
The inquiry addresses the economic principle that taxpayers might be more incentivized to find ways to save on taxes than to earn a similar amount through income. This is because, in the U.S., the government levies taxes on gains from private investment. Low capital gains taxes are intended to promote investment and fuel economic growth. On one hand, a tax system aims to redistribute income through mechanisms like the earned income tax credit, which can act as a work disincentive for near-poor families. On the other hand, the principle of tax efficiency is concerned with designing a system that raises necessary revenue without overly distorting economic decisions.
Political ideologies diverge on tax strategy. Some support 'Trickle Down' policies, reducing taxes to empower spending and investment by consumers and businesses, while others believe in borrowing through bonds to finance government spending. The ability-to-pay principle suggests that taxes should be scaled according to an individual's financial capacity.