Question

Some economists argue that taxing consumption is more efficient than taxing income. Following the same argument, the minister of finance of a country introduced a new tax for sugar-based products "sugar tax" to promote healthy eating in the economy.

a) Discuss why the sugar tax can be considered a good tax.

Answer 1

The sugar tax can be considered a good tax as it discourages the consumption of sugar-based products, generates revenue, and shifts the tax burden from income to consumption.

Step-by-step explanation:

The sugar tax can be considered a good tax for several reasons. Firstly, it can discourage the consumption of sugar-based products, which can help promote healthier eating habits in the economy. This can have positive effects on public health, such as reducing the prevalence of obesity and related diseases.

Secondly, the sugar tax can generate revenue for the government, which can be used to fund programs and initiatives aimed at improving public health or addressing other societal needs.

Lastly, the sugar tax can help shift the tax burden from income to consumption. Taxing consumption is considered to be more efficient than taxing income by some economists, as it avoids disincentives to work and invest that can be caused by high income taxes.

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